Markets: WTI races to $68

Crude oil and gold prices soared on Monday as the weakness of the US dollar, which hit a five-month low against the euro, and signs that the worst of the economic crisis, particularly in Asia, is behind, prompted investors to buy commodities.

On the energy market, Nymex July West Texas Intermediate rose to a seven-month high of $68.29 a barrel, up $1.87 on the day and more than double this year’s low of $32.7 a barrel set in mid-February. ICE July Brent rose $2.01 to $67.54 a barrel.

The gains come after last week’s Opec meeting sent a bullish message to investors. Abdalla El-Badri, the cartel’s secretary general, said that Opec was at last “seeing the light at the end of the tunnel”, while Ali Naimi, Saudi oil minister, said that the world economy has strengthened enough to cope with $75-$80 a barrel oil prices.

Traders in the physical market are, nonetheless, surprised about oil strength, warning that oil demand remains weak outside China, India and the Middle East, and inventories, both onshore and floating on tankers, are close to a record high.

The surge in investments flows pushed the spot S&P GSCI commodities index, the asset class benchmark, to a seven-month high, up 29.8 per cent so far this year. The main gains were concentrated on Monday on energy and precious metals, but base metals, agriculture and soft raw materials also posted strong gains.

“Risk appetite is slowly but surely on the rise, and commodities are gaining favour quickly,” Barclays Capital said in a report. “Institutional investors, Sovereign Wealth Funds and asset managers alike are going overweight commodities too.”

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