Most commodity markets rose this week, boosted by Greece’s second eurozone bailout and extra liquidity from central banks, while oil hit nine-month highs on rising tensions over crude producer Iran.
“It could be argued that the Greek bailout has lifted a short-term cloud from investors’ immediate horizons, with the threat of imminent default averted for now,” CMC Markets analyst Michael Hewson said.
“Even so ... the recent rally probably has more to do with the markets being juiced by lots of liquidity from major central banks,” he said, citing recent liquidity injections from the Bank of England and the Bank of Japan.
Eurozone finance ministers, meanwhile, sealed an unprecedented agreement on Tuesday for a new 237 billion euro (US$310 billion) bailout that is designed to save Greece from a devastating default. However, many commentators have serious doubts about Athens’ ability to meet its 2020 debt target, with the Greek economy falling deeper into recession and growth looking a distant prospect.
Many raw materials also got support from buoyant US and German economic data.
OIL: World oil prices hit new nine-month highs, as traders fretted about the impact of Iranian tensions on stretched global supplies.
New York crude rallied on Friday to US$108.99 per barrel, the highest level since May last year, and one day after Brent oil hit a similar high at US$124.50.
“Oil prices are continuing to soar on the back of the Iran crisis,” Commerzbank analyst Carsten Fritsch said.
UN nuclear inspectors returned from Iran on Wednesday with no progress in their search for answers from Tehran on its alleged bid to develop nuclear weapons, leading Washington to brand the trip a “failure.”
The global oil supply outlook is already stretched by lower output from South Sudan, Syria and Yemen.
“Supply from South Sudan and Syria is down, Libya is not back to pre-war capacity, unrest is still widespread in both the Middle East and North Africa region and Nigeria, and in addition North Sea deliveries continue to disappoint,” he said.
By late Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in April jumped to US$123.83 from US$119.32 the previous week.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for April rallied to US$108.23 from US$102.83 the previous week.
PRECIOUS METALS: Gold, silver, platinum and palladium hit multimonth highs to finish the week in positive territory.
By late Friday on the London Bullion Market, gold advanced to US$1,777.50 an ounce from US$1,711.50 the previous week.
Silver rose to US$35.57 an ounce from US$33.55.
On the London Platinum and Palladium Market, platinum increased to US$1,714 an ounce from US$1,638.
Palladium climbed to US$714 an ounce from US$697.
COFFEE: Coffee prices edged higher in subdued trade.
By Friday on LIFFE, Robusta for delivery in May rose to US$2,035 a tonne from US$2,008 a week earlier.
On NYBOT-ICE, Arabica for May firmed to US$2.0235 a pound (0.45kg) from US$2.022.
BASE METALS: Base or industrial metals gained across the board.
“Prices rose sharply, as one of the market’s biggest concerns, sovereign debt and in particular Greek sovereign debt, was somewhat calmed by news of an agreement of a bailout package,” Barclays Capital analyst Gayle Berry said.
By late Friday on the London Metal Exchange, copper for delivery in three months jumped to US$8,502 a tonne from US$8,293 the previous week.