LONDON, Feb 20, (AFP): Oil prices soared this week on the back of buoyant investor sentiment, a weaker dollar and heightened tensions between crude-exporting Iran and the West, traders said.
“Crude oil prices surged... supported by a general optimism in equity markets and amid concerns over a potential new nuclear program from Iran,” said analyst Myrto Sokou at the Sucden brokerage in London.
However, gains across most commodities were tempered after the US Federal Reserve unexpectedly raised the rate on emergency loans to banks, known as the discount rate or primary credit rate, by a quarter point to 0.75 percent.
Elsewhere, cocoa rose amid ongoing instability in the Ivory Coast, the world’s leading producer of the commodity that is largely used to make chocolate.
Oil: Prices surged as the dollar weakened and on heightened geopolitical tensions surrounding Iran’s nuclear ambitions. Oil had leapt by three dollars on Tuesday as the euro rallied against the dollar after European Union finance ministers put pressure on Greece to tackle its massive debt problems.
A weaker US currency makes dollar-priced oil cheaper for buyers using stronger currencies, lifting demand.
Iran, meanwhile, recently began enriching uranium to 20 percent purity, which the United States and several other powers said added to evidence that Tehran is seeking to build a nuclear weapon. The Islamic republic counters that its only goal is peaceful nuclear energy and research.
US Secretary of State Hillary Clinton said her country had no plan for military action against Iran, while Admiral Mike Mullen, the chairman of the US Joint Chiefs of Staff, said Washington has not ruled out military action.
On Friday, oil fell as the dollar hit a nine-month high against the euro thanks to a surprise change to the Fed’s monetary policy, traders said. The European single currency hit 1.3443 dollars — its lowest level since May 18. The Fed’s shock move sparked speculation that a rise in the main Fed funds rate might be closer than previously thought, boosting the dollar on hopes of an increase in yields on US financial assets.
“At the same time, hopes of a rebound in oil demand were dampened, but oil price losses seem contained, the more so as the inventory data published by the US Department of Energy (DoE) yesterday did not provide much cause for optimism,” said Commerzbank analyst Carsten Fritsch.
The Department of Energy on Thursday said that US crude oil stockpiles rose by nearly 3.1 million barrels to 334.5 million barrels for the week ended February 12, compared with average forecasts for a 1.8-million increase.
Base Metals: Base metals prices forged higher on the back of tight supplies and keen demand.
Three-month aluminium rose to $2,113 a tonne from $2,039.
Three-month lead gained to $2,320 a tonne from $2,103.
Three-month tin climbed to $16,960 a tonne from $16,025.
Three-month zinc increased to $2,301 a tonne from $2,147.
Three-month nickel advanced to $20,425 a tonne from $18,500.
Precious Metals: Gold prices increased after the World Gold Council forecast that western investment demand for gold will remain “well underpinned” this year, regardless of the health of the economy.
The upbeat forecast came despite news that gold demand sank by 11 percent last year in tonnage terms, owing to weaker industrial and jewellery demand, according to the WGC.
Investors tend to flock to gold in times of economic uncertainty owing to its status as a safe-haven investment. The precious metal is also regarded as a safe store of value in times of higher inflation.
Silver climbed to $15.95 an ounce from $15.33.
On the London Platinum and Palladium Market, platinum advanced to $1,513 an ounce from $1,475.
Palladium increased to $435 an ounce from $416.
Sugar: Prices sank further from the 30-year high struck at the start of February.
Sugar futures have been hitting multi-year highs in recent weeks on tight supplies amid downgrades to production in India.
On LIFFE, London’s futures exchange, the price of a tonne of white sugar for May sank to 705.80 pounds compared with 733.40 pounds.
Cocoa: Cocoa prices jumped higher on the back of sizzling tensions in the world’s top producer Ivory Coast.
Since the beginning of the week, protests studded with violence have taken place across the west African country, but the demonstration in Gagnoa was the first where deaths were reported.
On the NYBOT, the May cocoa contract climbed to $3,104 a tonne compared with $3,076.
Coffee: Coffee prices gained in New York but pulled lower in London.
On the NYBOT, Arabica for May rose to 136.80 US cents a pound compared with 132.05 cents.
Grains And Soya: Grains and soya prices fell. May-dated soyabean meal — used in animal feed — dipped to $9.53 from $9.54.
Wheat for May slid to $4.97 a bushel from $5.01.
Rubber: Malaysian rubber prices rose, following a regional trend which saw the commodity hit a four week high on the Tokyo Commodity Exchange.
Traders said that higher crude oil prices and a weaker yen have pushed up prices.