Written by Sumit Roy  |

February 21, 2012

Morning Call: WTI Crude Oil Hits 8-Month High As Iran Halts Exports To U.K. & France, Gold Rises Near $1740

Details

Crude oil, precious metals, and copper rise, while grains and natural gas fall.

IN TODAY'S HEADLINES...

• Commodities are opening the new week in mixed fashion amid light news flow. On the macro front, private Greek bondholders are set to take losses of more than 70 percent as a condition of the new bailout. Rating agencies will likely consider this a "selective" or "orderly" default; private investors would have likely lost everything in the event of a disorderly default.
  Greece secures bailout to avoid debt default
  
  
• Trading action in precious metals remains subdued, but gold is creeping back toward the top end of its recent range. The yellow metal was last trading up by $4.33, or 0.25 percent, to $1739.29/oz, while silver added $0.14, or 0.4 percent, to $33.72. Platinum gained $18.50, or 1.12 percent, to $1665.50 and palladium rose by $7.22, or 1.04 percent, to $702.50.
  
  "The supportive factors—the euro zone debt crisis and expectation of loosening monetary policies around the world—have been around for a while and gold needs something new to break the range," said Hou Xinqiang, an analyst at Jinrui Futures.
  Gold hits 1-1/2-week high after Greece deal
  
  
• Geopolitical tensions are spurring strength in crude oil prices again today as Iran pre-emptively halted oil exports to U.K. and France. The move is not seen as very significant, as the two countries only receive 1 percent and 4 percent, respectively, of their oil imports from Iran.
  
  Nevertheless, the move is reminder that the entire European Union will cease trading oil with Iran within months, putting the burden on Iran to find new buyers for its crude, while EU members must secure alternative supplies.
  
  WTI was last trading up by $1.31, or 1.27 percent, to $104.55/bbl after reaching $105.44 earlier — its highest level in nine months. Brent fell by $0.20, or 0.17 percent, to $119.85, but remained near eight-month highs.
  Oil Trades Near Nine-Month High on Iran Tension
  
  
• Natural gas is giving back a portion of last week's rally as the fuel falls by $0.08, or 2.94 percent, to $2.61/mmbtu. Though prices are oversold and technical conditions are ripe for a continued bounce, bearish fundamentals are keeping a lid on prices. Weather forecasts are still bearish, with warmer-than-normal temperatures forecast for the major consumption regions of the United States for the next two-week period.
  
  Still, prices may gradually move higher as some traders buy on hopes that the bottom may already be in.
  Fracking's effects on groundwater may be overblown, study shows
  
  
• Grains are mixed today ahead of the USDA's crop forecast later this week. "The market is relatively quiet after a long weekend and keenly waiting for the USDA outlook figure. At the moment, we are seeing strong export demand for U.S. wheat and lower supplies from Russia and Ukraine," said Lynette Tan, an analyst with Phillip Futures.
  
  Corn was last trading lower by $0.06, or 0.93 percent, to $6.36/bushel, while soybeans add $0.02, or 0.14 percent, to $12.69, and wheat falls by $0.07, or 1.01 percent, to $6.38.
  U.S. wheat, corn, soy await USDA data
  
  
• Copper is recovering all of Friday's losses and then some on bargain buying. The industrial metal was last trading higher by $0.09, or 2.55 percent, to $3.80/lb.
  
  "We've been maintaining a bullish view in the medium term, funds are still very interested in copper...We still see the medium-term outlook to the upside," said Dan Smith, head of metals research at Standard Chartered.
  Copper rises with euro on relief over Greece
  
  

What to Watch For:

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