Tags: Grains | Oil | Fears | US | Storm | Egypt

Grains Jump, Oil Nears '08 Peak on US Storm, Egypt Fears

Wednesday, 02 Feb 2011 02:22 PM

Grains surged and oil traded near pre-financial crisis highs Wednesday on supply fears stoked by a harsh winter in major crop-grower the United States and potential instability across the oil-rich Middle East.

Wheat jumped over 2 percent in Chicago, pulling corn and soybeans higher, after a winter storm pummeled the country's Midwest crop belt, paralyzing grain and livestock movement. Strong exports demand for wheat added to the run.

"Right now in this environment, it's hard to set these prices back and keep them lower," said Shawn McCambridge, grains analyst at Prudential Bache Commodities in Chicago.

Among other commodities, copper hit record highs for a third straight day and raw sugar hit a 30-year top as a massive cyclone hit sugar exporter Australia.

Investors will be keenly watching data on U.S. jobs and factory activity on Thursday to see if the economy was keeping pace with the commodities rally of the past weeks, inspired largely by supply concerns.

A snowstorm dumped up to 20 inches (51 cm) of snow in the U.S. Midwest, delaying by half an hour the start of open outcry trading at the Chicago Board of Trade where agricultural markets are traded.

The storm has wreaked havoc on agricultural operations, threatening the dormant winter wheat crop and the health of livestock herds. It has also slowed the processing and transportation of agricultural commodities.

Very cold weather over the next several days in the U.S. Plains could provide further support to wheat, as it exposes hard red winter wheat to the risk of winterkill.

OIL NEAR 2008 PEAK

In oil, London's Brent crude raced above $102 a barrel for a second straight day, its highest level since September 2008 when prices began crumbling in the run-up to the financial crisis.

In New York, West Texas Intermediate (WTI) crude, the benchmark for world oil, initially rose about half percent to above $91 per barrel before retreating on data showing record high crude stockpiles at a key U.S. storage hub.

The 19-commodity Reuters-Jefferies CRB index, largely influenced by the WTI, hit October 2008 highs.

Oil spiked on fear that unrest in Egypt would spread across the Middle East and North Africa, source of more than a third of world supply. after a situation that normally would have led to a sell-off.

"We suspect that the (as) yet unresolved political standoff in Egypt will likely keep oil prices fairly well bid, at least for the balance of the week," said Edward Meir, senior commodities analyst at brokers MF Global.

Egypt controls the Suez Canal and the Suez-Mediterranean oil pipeline, which together moved over 2 million barrels per day of crude and oil products in 2009. Both the canal and pipeline were functioning normally, although there have been disruptions to oil shipments at Egypt's Alexandria and Damietta ports.

Supporters of President Hosni Mubarak attacked protesters with fists, stones and clubs in Cairo on Wednesday as the Egyptian government rejected international calls for the leader to end his 30-year-rule now.

At the back of many investors' minds is the worry that the unrest in Egypt could spread to bigger oil producers such as Libya or even Saudi Arabia.

© 2017 Thomson/Reuters. All rights reserved.

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Grains surged and oil traded near pre-financial crisis highs Wednesday on supply fears stoked by a harsh winter in major crop-grower the United States and potential instability across the oil-rich Middle East. Wheatjumped over 2 percent in Chicago, pulling cornand...
Grains,Oil,Fears,US,Storm,Egypt
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2011-22-02
 

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