Commodity Prices Boosted by EU Summit Deal

Commodity Prices Boosted by EU Summit Deal

Crude oil prices surge on surprise news of deal to relieve European debt crisis.

Commodity prices mostly rose over the week thanks to strong support won Friday after a European Union summit delivered an unexpected deal aimed at further tackling the eurozone debt crisis.

A surprise agreement to save the euro wrenched after an all-night summit of leaders of the 17 eurozone nations brought immediate relief to crisis-hit Italy and Spain and sent the single currency soaring on Friday.

At the end of often volatile talks stretching almost until dawn, EU President Herman Van Rompuy hailed a "real breakthrough" to calm financial markets and reshape the eurozone to prevent future crises.

"It was a difficult European Council and summit but it was a fruitful one," he said.

OIL: World oil prices surged at the end of a volatile trading week, with crude futures supported by the surprise EU summit deal and strike action by energy sector workers in Norway, traders said.

Prices rocketed more than $4 a barrel on Friday as traders lauded a $150-billion growth pact pushed through by the European Union after Italy and Spain lifted their opposition to it, analysts said.

"The optimistic news from the EU summit spread bullish signs across the oil market as crude oil prices rebounded strongly from recent losses," said Sucden Financial Research analyst Myrto Sokou.

Crude markets were rejoicing after Spain and Italy withdrew their opposition to the deal which enabled it to be passed, said Justin Harper, market strategist for IG Markets Singapore.

Prices were up "primarily because of the summit and this positive news that came out," he told AFP.

"Because the expectations were so low to start with, people really weren't expecting anything to come out of it and we've got some positive development, obviously a lot of money, $150 billion (120 billion euros)," he added.

Fears of Brinkmanship

Earlier Italian and Spanish brinkmanship had ignited fears that the two-day summit aimed at paving the way for deeper economic integration and ending the long-running crisis would be derailed.

But the two countries were mollified after more than 13 hours of intense talks at which they got measures they sought, said Luxembourg Prime Minister Jean-Claude Juncker, head of the eurogroup finance ministers.

Eurozone leaders also agreed to use the bloc's bailout fund to directly support struggling banks and bring down borrowing costs of troubled countries, opening the door to emergency aid for Rome and Madrid.

Despite the crude price rally, Harper said things were still looking grim in the eurozone.

"I think it's a short term rally, it could fizzle out because people have seen that there's still a lot of infighting between all the different member states," he said.

"They're attacking the short-term issues... there's still a lot of issues to be resolved so sadly I think (the rally) can't be sustained."

Iran was also in focus, with an EU embargo on Iranian crude due to come fully into effect on Sunday, on the heels of further U.S. sanctions.

Western countries and Israel believe Iran is trying to develop a nuclear bomb under cover of its civilian program but Tehran insists its purpose is merely peaceful.

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in August rocketed to $95.43 a barrel from $90.62 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for August rallied to $82.20 a barrel from $79.39.


PRECIOUS METALS

Prices won strong support Friday in the wake of the EU summit deal.

"Gold and the other precious metals are making a strong recovery... doubtless on the back of a much weaker US dollar in the wake of the EU summit," Commerzbank analysts said in a note to clients.

By late Friday on the London Bullion Market, gold climbed to $1,598.50 an ounce from $1,565.50 a week earlier.

Silver grew to $27.08 an ounce from $26.81.

On the London Platinum and Palladium Market, platinum decreased to $1,428 an ounce from $1,435.

Palladium dropped to $578 an ounce from $608 an ounce.


BASE METALS: Base metals prices rose across the board after a sharp rally Friday. Aluminium had hit a two-year low at $1,832.25 on Wednesday.

"The metals are undergoing a relief rally for now," said William Adams, an analyst at Fast Markets research group.

By late Friday on the London Metal Exchange, copper for delivery in three months jumped to $7,684 a ton from $7,339 a week earlier.

Three-month aluminium grew to $1,905 a ton from $1,878.

Three-month lead rose to $1,842 a ton from $1,820.

Three-month tin gained to $18,910 a ton from $18,410.

Three-month nickel advanced to $16,690 a ton from $16,350.

Three-month zinc increased to $1,860 a ton from $1,813.


RUBBER: Prices dropped as dwindling demand from lead consumer China and tumbling oil prices offset a tight supply situation caused by the rainy season. Crude oil is used to make synthetic rubber.

By Friday, the Malaysian Rubber Board's benchmark SMR20 slid to 276.45 U.S. cents a kilo from 279.05 cents a week earlier.


Copyright 2012 Agence France-Presse

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