Oil prices rose by more than $1 a barrel on Monday while gold jumped above the $950 level as dollar weakness helped commodity markets make a positive start to the new trading week.
In oil markets, Nymex August West Texas Intermediate rose $1.24 to $64.80 a barrel while ICE September Brent rose $1.19 to $66.57 a barrel.
EDITOR’S CHOICE
Chinese demand bolsters crude - Jul-17
Q&A: India and the march of emerging Asia - Jul-14
Lex: Chinese GDP - Jul-16
CME to clear gold forward contracts - Jul-14
Short View: US retail sales and oil - Jul-14
Weeds start to sprout among the ‘green shoots’ - Jul-13
Traders said dollar weakness, gains for stock markets and better-than-expected data from China last week were providing support for oil prices.
Chinese demand for crude oil is expected to remain high as China tries to develop self-sufficiency for its energy requirements. Chinese refineries produced record volumes in June, up 7.8 per cent year on year, while domestic crude output continued to decline, increasing demand for supplies from the international market.
Base metals were led higher by copper which hit its highest level of the year at $5,455 a tonne.
Analysts at Citigroup said financial flows were becoming increasingly influential in the copper market and because of this, the dollar’s trend had become extremely important.
“The recent bout of weakness in the dollar has helped to lift copper (prices) close to nine-month highs in spite of the indications that China’s State Reserve Bureau has stopped buying (for its strategic stockpiles),” said Citigroup.
Jon Bergtheil of Citigroup said the feature of metals markets being driven by financial variables, rather than industry variables, should not be played down as a short-term phenomenon as it helped copper and aluminium to “unjustifiably levitate” above $8,000 a tonne and $3,000 a tonne for a prolonged period in 2008.
Aluminium traded at $1,736 a tonne.
Gold jumped to $953.20 a troy ounce, trading between a low of $937.90 and a high of $953.40 after ending trading in New York on Friday at $936.70.
Tom Pawlicki of MF Global cautioned that gold prices could come under pressure because of weak fundamentals with due to weak physical demand, especially in the Middle East and Asia due to relatively high prices and economic uncertainty. Mr Pawlicki also noted that recycling of old jewellery pieces was still being reported from key demand regions (effectively increasing supply in the market).
