Copper and oil prices climb on fears of supply disruption
By Gregory Meyer in New York
Published: February 4 2011 02:28 | Last updated: February 4 2011 18:55
Oil and copper prices broke this week above $100 a barrel and $10,000 a tonne respectively, amid strong demand and supply worries.
“The strength of the global economic recovery is driving commodities like base metals and energy higher and these two sectors have been the best performers during the past week,” said Ole Hansen, senior commodity analyst at Saxo Bank in Denmark.
Oil prices fell back on Friday, but Brent, the global benchmark, was able to retain some weekly gains.
In late afternoon trade in London, ICE March Brent was at $99.88 a barrel, a gain of 0.5 per cent on the week. In New York, Nymex March West Texas Intermediate traded at $88.70, a decline of 0.6 per cent on the week.
The surge in prices above $100 a barrel earlier in the week came amid worries that unrest in Egypt would affect oil flows from the Middle East.
However, the Suez Canal and the strategic Sumed pipeline that links the Red Sea with the Mediterranean operated as normal during the week.
Adam Sieminski, chief energy economist at Deutsche Bank in Washington, said that geopolitics were likely to have been playing a more active role in the oil markets recently, but added: “Although events in the Middle East are making headlines, their actual impact on the oil markets appears to have been relatively limited.”
Traders and analysts say that the Opec oil cartel has more than enough spare production capacity to cushion any disruption.
However, some traders and analysts worry that the unrest in Egypt could spread to oil-rich Middle East countries, including Saudi Arabia and Kuwait, affecting supplies.
Food prices surged during the week, with corn, soyabean and wheat prices all hitting 30-month peaks.
The UN’s Food and Agriculture Organisation said that its benchmark food index hit a fresh all-time high last month, stoking inflationary concerns in both poor and rich nations.
Bruno Le Maire, French farm minister, warned on Friday there was a “real risk of a global food crisis”.
The surge in oil, metals and food prices is starting to filter slowly into retail prices, with more companies announcing further increases during the week.
Electrolux, the world’s second-largest home appliances maker, said it would raise retail prices by between 8 and 10 per cent to cope with metals inflation.
Kellogg, the US-based food company known for its breakfast cereals, also said it would raise prices.
Unilever, the maker of Knorr soups and Dove soaps, said during the week it too would raise prices.