Written by Sumit Roy  |

February 28, 2012

Morning Call: Silver Surges ($35.94) To 5-Month High As Oil Falls Again, NatGas Rises On Contract Rollover

Details

Falling oil prices boosts other risk assets for a second day.

IN TODAY'S HEADLINES...

Most commodities are advancing today, as another day of losses in crude oil eases fears that high energy prices will derail the global economy. Investor risk appetite remains extremely strong, with the S&P 500 now trading at the highest levels in close to four years.

• Though oil prices are down a bit from recent highs, the recent rally has many now fretting about inflation. In turn, that has helped the monetary metals, gold and silver. The former is up by $10.85, or 0.61 percent, to $1778.53/oz, while silver jumped $0.55, or 1.55 percent, to $35.94 after surpassing $36 earlier—the best level in five months.
  
  Meanwhile, platinum gained $6, or 0.35 percent, to $1712.50 and palladium rallied by $6.50, or 0.92 percent, to $711.75.
  
  Referring to the strike at the largest platinum mine in South Africa, UBS analysts said, "The situation is continuing to progress slowly...with the company announcing yesterday that it will re-hire about 87 percent of the dismissed workers. As of yesterday, 9,000 workers had returned to work."
  
  "Nevertheless, we doubt that the potential for a supply shock out of South Africa is enough to justify a significantly higher platinum price."
  Gold firms with euro, stocks ahead of ECB financing
  
  
• Crude oil is lower for a second session, as traders once again take profits and contemplate whether prices have run up too far and too fast. On Monday, Brent hit a record high in terms of euros and British pounds. The benchmark was last trading lower by $0.63, or 0.51 percent, to $123.54, while WTI inched down by $0.04, or 0.04 percent, to $108.52.
  
  "We do not see sustained gains from here, and the market is likely to pause," said Andrey Kryuchenkov, an analyst at VTB Capital. "The market has been overbought lately, with a substantial geopolitical risk premium in London, due to ongoing jitters over Iran's controversial nuclear program."
  Oil Drops a Second Day on Concern Prices Near 9-Month High May Curb Demand
  
  
• Prices for natural gas are up by $0.12, or 4.87 percent, as the higher-priced April futures contract takes over the front-month position from the now-expired March contract. Weather forecasts remain bearish, with much-warmer-than-normal temperatures forecast for the major consumption regions of the United States in the next two-week period.
  Linn to Buy Natural Gas Assets From BP for $1.2B
  
  
• The surge in soybeans continues today as the grain notches a fresh five-month high. Prices were last trading up by $0.08, or 0.58 percent, to $13.01/bushel.
  
  "There's been that ongoing concern around the drought conditions in South America and on the top of that you've got fairly strong demand for oilseeds coming out of China," said Michael Creed, an agribusiness economist at National Australia Bank. "The market has clearly tightened and has become a lot more bullish the past few days."
  
  Meanwhile, corn rose by $0.03, or 0.39 percent, to $6.47 and wheat added $0.06, or 0.85 percent, to $6.51.
  Soybeans Climb to Highest in Five Months as Rains Come Too Late for Brazil
  
  
• Copper is putting in a solid advance today, as the industrial metal gains $0.06, or 1.53 percent, to $3.94/lb amid broad gains in financial markets.
  
  "But copper's rally is getting increasingly hard to justify on fundamental grounds," said Stephen Briggs, an analyst at BNP Paribas. "You have LME stocks of copper falling every day, but stocks in China have risen by more than LME stocks have fallen over the last four months which suggests that demand is not that magnificent by Chinese standards."
  Copper hits two-week high on ECB injection

What to Watch For:

8:30 a.m. EST: Durable Goods Orders (January)