By Javier Blas in London
Published: April 2 2010 13:15 | Last updated: April 2 2010 13:15
Commodities prices ended the week at the highest level since late 2008, with oil hitting $85 a barrel, bolstered by signs of strong growth in manufacturing across the world, particularly in China and India.
“Evidence of a strong rebound in the global movement of goods is continuing to accumulate,” said Paul Horsnell, head of commodities research at Barclays Capital in London.
Nymex May West Texas Intermediate hit $85.22 a barrel, the highest since October 2008. It closed the week at $85.20 a barrel, up 6.5 per cent on the week.
The surge towards the $85 a barrel level is the clear sign that oil prices are breaking the $70-$80 a barrel price range of the past six months. Olivier Jakob, of Swiss-based Petromatrix, cautioned that rallies above $85 a barrel would “be difficult to sustain”.
The rise in oil prices – 75 per cent over the past year – is starting to worry some policymakers. David Kirsch, director of market intelligence at consultants PFC Energy, said that increasingly Opec delegations – particularly those of the Gulf Arab states – are concerned about managing rising prices. “Concern is shifting toward the possibility of a sharp price rise that could derail the nascent economic recovery.”
Some analysts have blamed investor flows at the start of the second quarter for the rise in oil and other commodities. But raw materials in which investors do not play a role, such as iron ore, have also posted strong gains, suggesting demand is growing.
Base metals and non-ferrous minerals posted strong gains on the back of rising manufacturing activity, analysts said.
On the London Metal Exchange, copper for delivery in three months rose to $7,939.75 a tonne, the highest since August 2008, bolstered by a drop in inventories. Nickel, the metal used in stainless steel, jumped to nearly $25,700 a tonne, its highest since May 2008.
Nick Moore, head of commodity strategy at Royal Bank of Scotland, warned that the surge in base metals was likely to entice some miners to reactivate idle production, particularly in markets such as nickel.
In non-ferrous markets, the cost of iron ore on the spot market on Thursday surged to $156.3 a tonne, the highest level since October 2008 and up 0.8 per cent on the day.
