Commodities rally after four days of losses as oil gains

Commodities climbed for the first time in five days as crude oil rebounded on renewed concern about supply disruptions on increasing West Asia tension.

The Standard & Poor’s GSCI Spot Index of 24 commodity futures climbed 1.2 per cent to 681.2 today as of 5:15 pm in Singapore, after plunging 3.8 per cent yesterday, the most since 2009. Crude oil in New York advanced 1.2 per cent as Bahrain suspended stock market trading after the government declared a state of emergency. Gulf-nation troops poured into the nation, which is next door to Saudi Arabia, the largest oil exporter.

“What people have in the back of their mind is the West Asia,” said Michael Haigh, global head of commodities research at Standard Chartered Plc, in Singapore. “Disruptions in West Asia and places like Libya tend to be long-lasting.” The S&P GSCI Index has advanced 7.9 per cent this year, with gains in the past month coming mostly from political unrest that started in Tunisia and spread to Egypt, Libya and Bahrain, sparking speculation oil supply will be disrupted.

Libya’s oil exports may be halted for “many months” because of damage to facilities and sanctions following a rebellion against leader Muammar Qaddafi, the International Energy Agency said in its monthly Oil Market Report.

The West Asia unrest outweighed concerns about radiation from a Japanese nuclear plant damaged by the country’s strongest earthquake on record and subsequent tsunami. The country is the world’s third-biggest user of crude oil, the top importer of corn and the second-largest buyer of copper ore.

Fuel rods
Military helicopters were deployed to drop water on the crippled Fukushima Dai-Ichi power plant as officials battling to prevent a meltdown said fuel rods at two reactors may have been damaged and temperatures at spent fuel pools were rising.

Clouds of white smoke or steam rose from the reactor buildings following a fire at Dai-Ichi’s No. 4 reactor this morning. Chief Cabinet Secretary Yukio Edano said radiation levels at the plant then rose, forcing a brief evacuation, but have since fallen. About 70 per cent of the fuel rods at the plant’s No. 1 reactor and a third of the No. 2 reactor’s fuel may have been impaired, Tokyo Electric Power Co. said. The Dai- Ichi nuclear complex has six reactors.

“Investors’ greatest worry is a meltdown of that nuclear plant,” Ker Chung Yang, an analyst at Phillip Futures Pte., said today by phone from Singapore. “It is less than a week after the Japanese quake. The outlook is still uncertain.”

Oil, Copper
Oil for April delivery gained 1.2 per cent to $98.37 a barrel after falling as much as 1 per cent to the lowest level in more than two weeks. About 1.3 million barrels a day, or 29 per cent, of Japan’s refining capacity was closed after the temblor and tsunami. Copper rose for the first time in six days on speculation reconstruction in Japan will boost demand. The contract for three-month delivery added as much as 2.2 per cent to $9,316 a tonne and traded at $9,277.25. “Following the steep losses in the last few days, the price now looks attractive to some buyers,” Li Peiying, an analyst at Essence Futures Co., said by telephone from Beijing. “People have started to shift their attention to the rebuilding that will boost demand in the next few months.” Corn for May delivery dropped as much as two per cent to $6.2 a bushel, the lowest level for the most active contract in two months, before reversing to increase one per cent to $6.4.