Commodities rally on Greek bailout, Iran fears

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," said CMC Markets analyst Michael Hewson. "Even so ... the recent rally probably has more to do with the markets being juiced by lots of liquidity from major central banks," he added, 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 ($310 billion) bailout that is designed to save Greece from a devastating default. The deal, reached after 13 hours of talks between governments, the European Union, the International Monetary Fund and private creditors, seeks to bring Greek state debt down to 120.5 percent of gross domestic product by 2020. However, many commentators have serious doubts about Athens' ability to meet the 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 $108.99 per barrel, the highest level since May 2011, and one day after Brent oil hit a similar high at $124.50. "Oil prices are continuing to soar on the back of the Iran crisis," said Commerzbank analyst Carsten Fritsch. 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." Iran has been hit by a raft of economic sanctions by the United States, United Nations and the European Union over its refusal to halt uranium enrichment activities. The Islamic republic insists that its nuclear programme is solely for peaceful civilian purposes. "The Iranian government's decision to obstruct the work of UN inspectors this week could further fuel fears that events are building towards an inevitable confrontation -- unless an off-ramp can be quickly found," noted Barclays Capital analyst Amrita Sen. Tehran announced last Sunday that it would halt its already limited oil sales to Britain and France in retaliation for a phased EU ban on Iranian crude that is yet to take full effect. The move was largely symbolic but was seen as a warning shot to other EU nations that are bigger consumers of Iranian oil, including Italy, Spain and Greece. Although those countries were not affected by Iran's announcement, they are included in an EU decision to stop buying Iranian oil that was announced last month and which will take full effect from July. The global oil supply outlook is already stretched by lower output from South Sudan, Syria and Yemen. "Considering the wide range of supply issues in the oil market at the moment the embargo against Iran comes at a very bad time," SEB commodities analyst Filip Petersson told AFP. "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." By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in April jumped to $123.83 from $119.32 the previous week. On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for April rallied to $108.23 from $102.83 the previous week. PRECIOUS METALS: Gold, silver, platinum and palladium hit multi-month highs to finish the week in positive territory. "Equities continue to get a lift from central bank liquidity operations, as do other so-called 'risk assets' such as precious metals and oil," said GFT analyst David Morrison. By late Friday on the London Bullion Market, gold advanced to $1,777.50 an ounce from $1,711.50 the previous week. Silver rose to $35.57 an ounce from $33.55. On the London Platinum and Palladium Market, platinum increased to $1,714 an ounce from $1,638. Palladium climbed to $714 an ounce from $697. 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," said Barclays Capital analyst Gayle Berry. German business confidence unexpectedly rose to a seven-month high as robust domestic demand helped buffer the European Union's largest economy against the region's debt crisis, data from the Ifo economic institute showed. Traders were also buoyed by US data showing initial jobless claims holding steady, a sign that the ailing labour market in the world's largest economy and biggest oil consumer was slowly improving. Meanwhile, British banking giant HSBC said China's manufacturing activity picked up although it remained below the boom-and-bust line in February as export orders weakened. HSBC's preliminary purchasing managers' index (PMI) stood at 49.7 in February. A reading above 50 points indicates growth, while a score below indicates contraction. "The HSBC flash Chinese manufacturing PMI showed further improvement to 49.7 from 48.8 in January," noted Berry. "Although it still remains below 50, the trend is improving which bodes well for metals demand going forward." By late Friday on the London Metal Exchange, copper for delivery in three months jumped to $8,502 a tonne from $8,293 the previous week. Three-month aluminium increased to $2,304 a tonne from $2,168. Three-month lead rose to $2,190 a tonne from $2,048. Three-month tin advanced to $24,125 a tonne from $24,000. Three-month zinc climbed to $2,078 a tonne from $1,971. Three-month nickel stood at $19,975 a tonne after $19,670. COCOA: Prices drifted lower as nervous traders took profits. By Friday on LIFFE, London's futures exchange, cocoa for delivery in May eased to £1,506 a tonne from £1,508 a week earlier. In New York on the NYBOT-ICE, cocoa for May slipped to $2,353 a tonne from $2,355. COFFEE: Coffee prices edged higher in subdued trade. By Friday on LIFFE, Robusta for delivery in May rose to $2,035 a tonne from $2,008 a week earlier. On NYBOT-ICE, Arabica for May firmed to 202.35 US cents a pound from 202.20 cents. SUGAR: Sugar futures gained ground. By Friday on LIFFE, the price of a tonne of white sugar for May increased to $657.10 from $628 the previous week. On NYBOT-ICE, the price of unrefined sugar for delivery in May rose to 24.84 US cents a pound from 23.80 cents a week earlier. RUBBER: Prices climbed as low supplies in major producing countries drove market sentiment. The Malaysian Rubber Board's benchmark SMR20 rose to 380.45 US cents a kilo from 370.45 cents the previous week.