WSJ: BASE METALS: Copper Sinks As Crude Oil Tops $100
By Tatyana Shumsky
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Copper futures slid 1% Wednesday morning on fears that higher crude oil prices will hamper the global economic recovery.
The most actively traded contract, for May delivery, was recently down 1.1%, or 4.9 cents, at $4.4605 per pound on the Comex division of the New York Mercantile Exchange.
The front-month contract, for March delivery, was down 0.9%, or 4.05 cents, at $4.4500 a pound.
Civil unrest in the Middle East has again pushed crude oil prices above the psychologically important $100 a barrel mark. Violent clashes between anti-government protesters and security forces continue in oil-producing Libya, while Yemen is struggling with anti-government demonstrations which have grown steadily over the past month. The political instability in the key oil-producing region has helped oil retake price levels last seen in late 2008.
Oil's rally has raised concerns that higher energy costs will dampen economic growth and crimp global demand for copper, forcing red metal prices to retreat in recent days.
"Copper is used in housing, cars, manufactured goods and demand for that type of stuff will drop as consumers clamp on spending to adjust for higher gasoline prices," said Matt Zeman, head of trading at Kingsview Financial in Chicago.
Despite Wednesday's decline copper prices remain near record highs of $4.6375 a pound, set Feb. 14. Prices for the red metal are up almost 35% from last year as analysts forecast global demand to outpace mine supply this year.
Moreover, the dollar-denominated copper futures is benefitting from recent weakness in the dollar, which makes the contracts appear cheaper to buyers using foreign currencies. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was recently down 0.5% to 76.679.
"The dollar hasn't received much of a safe-haven run so it makes copper pretty attractive in currency terms," said Dan Cook, chief executive and senior market analyst at IG Markets. "As long as the dollar remains relatively weak it should support high copper prices."
