Green Light for the Red Metal?

Supported by a lower U.S. dollar and relief over the economic situation in Europe, copper prices shot up 15 percent this week. Early Thursday morning, details were released of a comprehensive bailout package whose primary purpose was to bolster the value of the European currency. In response, investors sold the U.S. dollar and bought the Euro currency. A cheaper U.S. dollar begot a broad-based commodities rally, and copper futures emerged as the primary beneficiary. December copper futures, which were as low as $3.03 per pound last week, traded as high as $3.75 per pound Thursday night.

It is thought that strengthening global industrial demand may tempt copper processors to replenish dwindling stockpiles. Until recently, copper warehouses, especially in China, have been holding off on buying partially due to uncertainty in western equity markets. With the German DAX climbing as much as 7 percent this week, and the S&P on track to enjoy its best October on record, this could be seen as a green light for warehouse managers to buy the red metal.

Friday morning, December copper futures were trading at $3.70 per pound.

Crude Oil Surges Higher

Crude oil prices rose sharply along with other commodity markets this week, rising over $7 per barrel (+8 percent) to a two-month high at $94.65. Crude oil prices were bolstered by encouraging news out of Europe and the potential for renewed strength global economy.

In the United States, crude oil supplies are being slowly reduced from near-record levels to more normal levels, while other developed nations worldwide are facing low stockpiles of crude oil. The relatively large supplies of U.S. crude have kept our prices lower than those in Europe. The U.S. benchmark contract, West Texas Intermediate crude oil was worth $93.25 on Friday, while the European benchmark, Brent crude, was trading nearly $17 higher (+18 percent) at $110.05 per barrel.

Gasoline prices did not rise as quickly as crude oil this week, with unleaded prices finishing the week nearly unchanged. Likewise, heating oil futures, a proxy for diesel fuel, only rose 4 cents per gallon, a gain of just 1.3 percent.