Crude oil prices surged above the $55 a barrel level on Wednesday, reaching their highest mark of the year and spearheading a strong rally across commodity markets.
Traders brushed aside rumours that the US government's stress tests would require the banking sector to raise significant new capital. Instead, further gains for equity markets and better-than-expected US employment data set a positive tone.
"There's a certain amount of blind optimism attached to this rally," said Michael Lewis, commodity strategist at Deutsche Bank: "It's too early to call an end to the recession but that is what equity markets appear to be signalling and commodities have been happy to follow their lead."
Mr Lewis said there had been a general repricing away from a "Great Depression scenario" to a less severe outcome for the global economy but Deutsche questioned whether the recent reflation rally would prove sustainable.
In energy markets, ICE June Brent jumped $1.38 to $55.50 a barrel after touching a high of $55.69 while Nymex June West Texas Intermediate rose $2.06 to $55.90 after reaching $56.06, a fresh peak for 2009.
US inventories data released on Wednesday showed crude stocks rose for a ninth consecutive week, up 600,000 barrels last week, but well below the consensus forecast for a rise of 2.2m barrels.
Crude imports rose 96,000 barrels a day to 9.92m b/d last week but that was offset by a bigger-than-expected increase in refineries' activity which limited the increase in crude stocks. US refinery utilisation increased 2.6 percentage points to 85.3 per cent.
Petrol inventories fell 200,000 barrels, confounding the consensus forecast for a rise of 700,00 barrels. Demand weakness appeared to ease ahead of the summer driving season with consumption averaging 9.04m b/d during the past four weeks, down 0.9 per cent compared with the same period a year ago. Nymex June RBOB unleaded gasoline traded 2.6 cents higher at $1.5980 a gallon.
Distillate stocks (including heating oil) rose 2.4m barrels, well above the consensus forecast for a 1m barrels increase. Distillate demand showed extreme weakness, averaging 3.53m b/d over the past four weeks, down 14.1 per cent compared with the same period a year ago. However, Nymex June heating oil gained 3.2 cents to $1.4580 a gallon, following crude prices higher.
Gold rose 1.3 per cent to $907 a troy ounce, moving between a low of $895.50 and a high of $912.25, seeing renewed buying interest on concerns that the banking stress tests could cause volatility in financial markets.
Growing confidence that China's economy would stage an early recovery helped the Baltic Dry index enjoy its best one-day gain for three-months with the global benchmark for freight costs for dry bulk commodities such as iron ore, coal and grain up 8.9 per cent to 2,065 points.
Economic recovery hopes pushed base metals higher with copper up 5.1 per cent to $4,760 a tonne and nickel jumping 4.8 per cent to $12,575 a tonne.
Tin prices surged 7.6 per cent to $13,450 a tonne, while lead rose 5 per cent to $1,475 a tonne and zinc gained 4.6 per cent at $1,600 a tonne.
Aluminium added 2 per cent at $1,575 a tonne, up in spite of a large increase of 42,600 tonnes in London Metal Exchange stocks.
Copyright: The Financial Times Limited 2009
