London-traded Brent grade of oil performed vastly different from its New York-traded counterpart. That’s an unusual behavior as most of the time all types of oil are influenced by same fundamentals. Rising demand for Brent can be explained by forecast of below-normal temperatures in Europe. Additionally, a militant group in Nigeria damaged pipeline that belongs to Italian company, resulting in a loss of 4,000 barrels per day of production.

Futures for delivery of crude oil in March dropped $0.93 to $96.91 per barrel on NYMEX. At the same time, Brent oil rose from $115.00 to $116.52 per barrel, the highest settlement since September 8, as of 20:43 GMT today on ICE.
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US industrial production expanded 0.4 percent in December. The Empire State Manufacturing Survey showed that manufacturing advanced this month. There are more reports this week that should show positive developments in the US economy.

Futures for delivery of copper in three months advanced 1.6 percent to $8,372 per metric ton on LME, the highest settlement since September 21, before trading at $8,332.50. That was the fourth day of gains.
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The European Union pledged €150 billion to the International Monetary Fund that the IMF will use to help in the battle with the region’s sovereign-debt crisis. The German Business Climate index unexpectedly increased to 107.2 in December from 106.6 in November, while analysts predicted it to drop to 106.2. Spain sold its three- and six-month bills at an auction yesterday, exceeding its maximum target.

The US housing starts increased from 627,000 to 685,000 and the building permits rose from 644,000 to 681,000 in November.

February futures for crude oil delivery advanced $3.19 to $97.24 per barrel on NYMEX. Brent oil was at $107.15 per barrel today as of 3:11 GMT on ICE after jumping from $104.30 to $107.00 yesterday. Gold advanced from $1,615.50 to $1,620.20 per ounce today on COMEX, following yesterday’s rise from $1,596.40 to $1,615.00. Copper traded near its opening level of $3.3720 per pound today, while the metal climbed from $3.3230 to $3.3640 yesterday.
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There’s the speculation that the International Monetary Fund prepared a loan to Italy. The officials denied the rumors, but traders felt their mood improving. In general, Monday was a day of ”risk-on mode” and most of commodities rallied.

Unfortunately for traders, there are many reasons for the rally to be short-lived. Moody’s Investor Service warned that the indecisiveness of the European leaders may lead downgrades for the credit rating of the European countries. The rating agency wrote:

The continued rapid escalation of the euro area sovereign and banking credit crisis is threatening the credit standing of all European sovereigns, cautions Moody’s Investors Service in a new Special Comment. In the absence of policy measures that stabilise market conditions over the short term, or those conditions stabilising for any other reason, credit risk will continue to rise.

Futures for delivery of copper in March rose as much as 2.7 percent to $3.3715 per pound by 13:14 on COMEX.
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The US nonfarm payrolls showed that the employment growth slowed from 158,000 jobs in September to 80,000 jobs in October. The Eurozone services PMI (in the final revision) contracted to 46.4 in October, compared to the preliminary estimate of 47.2. The report said that the conditions in France, Italy and Spain deteriorated, leading to the fasted decline of the industry since mid-2009. The German factory orders fell 4.3 percent in September.

The pessimism rules markets and gold remains in high demand as a safe haven not only among speculators, but among central banks as well. The International Monetary Fund reported that Bolivia, Kazakhstan, Tajikistan and Thailand added a total 26.7 tons of gold valued at $1.52 billion to their reserves in September. Central banks bought 220 tons of the metal during this year, according to the World Gold Council.

Spot price for gold fell from $1,765.90 to close at $1,755.30 per ounce on COMEX. The price rose from $1,743.50 per ounce this week.
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Zinc was falling in three of the last four years on the London Metal Exchange, showing the worst performance among the six major industrial metals. The slowdown of the global economy contributed to the decline. Another reason for the bad performance was overproduction of the metal.

But market analysts began to view zinc in more favorable light. The rapid economic growth in Asia, particularly China, increase demand for industrial metals. Production of rust-proof steel reached the record high of 31.7 million metric tons in the second quarter of this year, according to estimates of Macquarie Group. About 50 percent of zinc is used to produce the alloy. Morgan Stanley predicted the expected production surplus of 270,000 metric tons in 2011 would fall to 130,000 in 2012. Experts forecast supply to drop as prices fell below production costs of some mines.

There are reasons to be optimistic for zinc, but also there are reasons to be cautious. The world economic recovery is encountering problems and may even falter, at least according to forecasts of most pessimistic economists. Such worries aren’t good for industrial metals. The International Monetary Fund cut its global growth forecasts to 4 percent for 2011 and 2011, compared to the previous estimates of 4.3 percent and 4.5 percent respectively.

Zinc rose today from $94.60 to $95.10 per kilogram on MCX, following the previous advance to the daily high of $96.10.
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Crude still remains in danger as concerns persist that the high prices will slow the global recovery. Goldman Sachs Group Inc. predicted a ”substantial” correction, while the International Energy Agency said that demand for oil is already falling. The International Monetary Fund trimmed its growth forecast for the US and Japan for 2011.

May contract for crude oil delivery rose $1.55 to $109.66 per barrel on NYMEX. Prices for crude have risen 28 percent from a year ago on concerns that the turmoil in the nations of North Africa and Middle East will hamper supplies.
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Gold also fell as slower growth means lesser inflation pressure and lower demand for the precious metal as a hedge against inflation. June contract for gold delivery slipped 0.8 percent to $1,456.60 in New York, falling from the record $1,478.
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Copper futures dropped in New York, paring previous gains, concerns resurfaced that slower economic growth would damp demand for the industrial metal. The International Monetary Fund stated yesterday that “recent global stability gains are threatened” by the European debt crisis. September futures for copper delivery slid $0.007 (0.2 percent) to $3.008 per pound as of 11:41 on COMEX.

Orange-juice futures dropped on forecast that production in Florida, the second-largest producer in the world, would be bigger than previously expected. The harvest, that ends this month, estimated to be 134 million boxes, compared to the June estimates of 133.6 million. September delivery for orange juice slipped $0.0765 (5.3 percent) to $1.3785 per pound by 13:00 on ICE.
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An expanding global economic recovery coupled with a rising demand from China sparked optimism for a worldwide increase of a copper usage. A gross domestic product in China expected to grow about 8 percent, while an inflation rate predicted to be 3 percent in 2010. Sales of new houses in the U.S. have jumped 27 percent in March, adding to a copper demand in the world’s second biggest consumer of the metal. LME-tracked copper inventories dropped 0.2 percent to 506,125 tons.

Delivery for copper in three months advanced $45 (0.6 percent) to $7,795 per metric ton today on the London Metal Exchange. July futures for copper delivery added $0.0175 (0.5 percent) to $3.548 per pound on NYMEX.
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Crude oil stabilized as U.S. job losses slowed and the unemployment rate dropped. U.S. stockpiles decreased last week as demand rose. The jobless rate dropped to 9.4 percent from 9.5 percent. September delivery for crude oil gained $0.09 to $72.03 per barrel by 11:33 on NYMEX.

The European Central Bank and 18 other banks agreed to a five-year cap on gold sales in attempt to prevent gold dumping. European central banks agreed to sell no more than a combined 400 metric tons of the metal a year through September 2014. As the International Monetary Fund didn’t sign this agreement and have plans to sell 403 tons from its reserves there is possibility that Chinese, Russians or another central bank would buy the 403 tons of IMF gold in one go. Delivery for gold in London dropped 0.8 percent to $955.92 per ounce as of 15:14 local time today.
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