Commodities rebound on better news from Greece

Commodity prices showed some rebound today in the international market after yesterday’s sharp fall, led by crude oil. Copper, lead and tin climbed, joining a rebound in other commodities, including oil, after European leaders showed support for Greece, easing concern that a default may hurt global growth.

Similar trend was seen in the Indian commodity futures market as well. Base metals went up by one to two per cent, while other commodities continued a downward trend on the Multi Commodity Exchange today, too.

The rebound seen was from the lowest level in more than four months. Standard & Poor’s GSCI index of 24 commodities rallied as much as one per cent to 655.20, paring yesterday’s 3.6 per cent slump that was driven by a drop in crude after the International Energy Agency said it would release oil stockpiles. Oil in New York jumped as much as 1.5 per cent, copper in London by 1.2 per cent, and corn in Chicago by one per cent.

Analysts believe the decision to release additional oil could hurt Saudi Arabia, which had said recently it would release additional oil from its reserves. Said one with Barclays Commodities: “Market participants see this as bearish, for prices in the short-term oil market could see upward pressure by year-end and into next year.” His concern was that IEA’s decision could send incorrect signals, as once the temporary stock release was over, there may not be much oil coming from Saudi Arabia, which had earlier said it would release more oil to meet demand and prices could start moving up from the end of the 2011.

Ajay Kedia of Kedia Commodities said gold also fell, followed by a sharp fall in crude oil prices as gold lost its appeal as a hedge against inflation and some more downside in it is possible. He says metals could also remain weak, despite today’s increase in prices.

Three-month copper on the London Metal Exchange advanced as much as 1.6 per cent to $9,100 a tonne, and traded at $9,060. Lead in London climbed 0.4 per cent to $2,558.50 a tonne, tin rose 0.2 per cent to $25,250 a tonne and nickel was unchanged at $22,125 per tonne. Aluminium was little changed at $2,508 a tonne and zinc dropped 0.4 per cent to $2,250 a tonne.

Corn for December delivery gained as much as 6.75 cents to $6.5275 per bushel on the Chicago Board of Trade, while wheat and soybeans also climbed. Rubber futures on the Tokyo Commodity Exchange reversed losses, with the November delivery contract gaining as much as 1.1 per cent to 364.5 yen per kg.