Commodities and crude oil prices rallied on the back of expectations of easier monetary conditions as the Bank of England announced further quantitative easing and following the European Central Bank’s announcement to boost liquidity.
The Reuters-Jefferies CRB index, which includes wheat, copper and oil, gained 0.8 per cent, as risk appetite returned. Crude oil prices, which had gained ground on a surprise fall in US inventory data on Wednesday, continued their ascent. November ICE Brent, which briefly slipped through the $100 support level earlier this week, rose 41 cents a barrel to $103.28, while November Nymex West Texas Intermediate rallied 84 cents a barrel to $80.54.
Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas, said news of increased liquidity helped the oil market, which was already supported at lower levels by supply and demand fundamentals.
Oil demand in emerging markets was holding firm, with little spill over effects from developments in the leading OECD countries, while non-OPEC supply growth, which had been expected to come on to the market in the third and fourth quarters of this year, had been pushed back, he said.
Hopes that liquidity would help Europe avoid a recession boosted industrial metals. Copper , which is closely associated with industrial activity and economic growth, rose above the $7,000 support level.
Copper for three-month delivery on the London Metal Exchange, rallied 3.9 per cent to $7,187.75 a tonne, while other industrial metals were firmer with aluminum up 1.6 per cent to $2,225 a tonne, and tin adding 5.7 per cent to $22,100 a tonne As London Metal Week draws to a close, the market saw news coming out of Indonesia, where Freeport McMoran , the largest listed copper producer, faced strikes at Grasberg, and Zambia, where the new government on Thursday lifted a suspension on metal export permits.
The Zambian mines ministry ordered the suspension in a document sent to exporters on October 4, saying new guidelines were to be introduced to the sector. The decision followed concerns that copper exporters have not been paying their full duties to the state and it was seen as an attempt to improve transparency in the industry. Officials said the move was in line with a presidential directive that all exports be cleared through the central bank.
Lifting the suspension, government officials said the new measures would come into effect when the Bank of Zambia was ready. Zambia’s copper production is expected to be around 730,000 tonnes this year and international companies including Glencore, First Quantum, Vedanta Resources and Vale have operations in the country.