OIL FUTURES: Crude Pushes Above $93/bbl

--U.S. crude oil adds gains as Middle East keeps traders on edge
--Nymex oil recently up 99 cents to $93.38/bbl
--Iran, Syria worries trump OPEC warning on demand slowdown

 
   By Jerry A. DiColo 
 

NEW YORK--U.S. crude-oil futures pushed higher Wednesday, adding to a $3 rally Tuesday as investors stay focused on renewed tensions in the Middle East.
Light, sweet crude oil for November delivery recently traded 99 cents, or 1.1%, higher at $93.38 a barrel on the New York Mercantile Exchange. Brent crude oil on the ICE futures exchange traded up 77 cents to $115.27 a barrel.
Oil prices rose Wednesday as concerns about Turkey and Syria continued to mount, after Turkey's top military commander warned that the country would take tougher action if Syrian shells continued to land on Turkish territory.
While Turkey and Syria aren't major oil producers, the possibility of expanded military activity highlights the threat that Syria's civil war could devolve into a regional conflict. Turkey is also an important oil-transportation route, and fears have grown that the 400,000 barrels a day of Iraqi oil piped to the Turkish port of Ceyhan could become a target.
"Elevated tensions and military activity along the Syria-Turkey border are reminders that isolated incidents could quickly spread," analysts at JP Morgan said in a note to clients.
On Tuesday, prices rose more than $3 a barrel as Israeli Prime Minister Benjamin Netanyahu called parliamentary elections for early 2013, a move seen by some as a way to shore up his political base ahead of possible military action against Iran.
The latest worries about oil supplies from the Middle East has trumped several reports this week suggesting global oil demand growth will stall.
The Organization of Petroleum Exporting Countries said Wednesday oil supplies will remain comfortable in the coming year, lowered its forecast for global demand growth this year and predicted a continued slowdown in 2013.
"Right now the market is undecided on the next move," said Phil Flynn, an energy analyst at Price Futures Group. "Weaker demand should mean lower prices but, in a world hellbent on keeping the economy afloat with stimulus, and the rising geopolitical risk, supply and demand won't matter."
Oil prices have seen big swings in recent days, but have still remained close to the level of $90 a barrel since falling from near $100 a barrel in mid-September.
In its monthly oil-market report, OPEC said oil-demand growth will fall to 800,000 barrels a day this year, down 100,000 barrels a day from its previous estimate. But the group warned that next year's demand faces "considerable uncertainties" that could lower its 2013 estimate by as much as 20%.
The OPEC report followed a report from the International Monetary Fund earlier this week suggesting that the risk of a global recession has risen, raising worries about oil demand even as Middle East tensions keep traders on edge.
Front-month November reformulated gasoline blendstock, or RBOB, recently traded 2.07 cents higher at $2.9794 a gallon. November heating oil recently traded 2.64 cent higher at $3.2296 a gallon.
--Ben Winkley contributed to this report.
Write to Jerry A. DiColo at jerry.dicolo@dowjones.com.

Gold futures swing between gains and losses on USD strength

Gold futures swung between modest gains and losses in rangebound trade during U.S. morning hours on Tuesday, as ongoing concerns over Spain and Greece boosted demand for the U.S. dollar.

Lingering worries over the health of the global economy also weighed on sentiment.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,775.55 a troy ounce during U.S. morning trade, easing down 0.02%.    

Prices were stuck in a narrow trading range of USD1,771.95 a troy ounce, the daily low and a session high of USD1,781.55 a troy ounce.

Gold prices were likely to find support at USD1,765.75 a troy ounce, the low from October 1 and near-term resistance at USD1,793.85, October 1’s high.

Market sentiment remained under pressure after the International Monetary Fund cut its global growth forecasts and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies.

The IMF said that the world economy will grow 3.3% this year, the slowest since the 2009 recession, and 3.6% next year, compared with July predictions of 3.5% in 2012 and 3.9% in 2013.

Investors also remained cautious amid uncertainty over how soon Spain may formally request a bailout lingered after euro zone finance ministers said Monday that Madrid did not need external financial aid yet.

Meanwhile, German Chancellor Angel Merkel said earlier that Greece was on a “tough path” following talks with Prime Minister Antonis Samaras in Athens, but one which she believed would pay off.

The talks came amid ongoing uncertainty over whether international creditors will extend loans to Greece, as the country struggles to meet deficit reduction targets.

The risk-off trade environment prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets like the U.S. dollar and Treasuries.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.3% to trade at 79.92.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Elsewhere on the Comex, silver for December delivery was dipped 0.02% to trade at USD34.01 a troy ounce, while copper for December delivery added 0.25% to trade at USD3.728 a pound.

Copper prices found support after the People’s Bank of China injected CNY265 billion into the money market, in a bid to ease tight liquidity conditions.

The move raised optimism for further supportive policy measures out of China, the world’s largest consumer of the industrial metal.

The good news behind high crude oil prices

WASHINGTON ( commodity news world ) : Rising oil prices often are the death knell for economic recovery. This time around the surge in crude oil is looking more like a harbinger of better days.

Political tensions over Iran's nuclear ambitions have pushed crude oil prices up 11 percent over the past month to around $123 a barrel, stoking concerns a violent confrontation that reduced supplies could send Brent crude above $150 a barrel.

Oil at that level could undermine a gradual strengthening of the world economy. Even at current levels, it could shave 0.2 percentage point from growth, analysts said.

Just as Europe's sovereign debt problems have started to ease, oil has emerged as a new headwind.

But the Iran-driven spike masks a broader underlying trend, and as long as military strikes are avoided, it appears to pose only a limited risk. In other words, there is a good news story.

Crude oil prices have been climbing in fits and starts since early October in line with slowly improving economic data, especially in the United States.

Equity prices have risen in lockstep with oil's advance. When the two rise together, it usually indicates a broad-based economic expansion. The Standard and Poor's 500 index is up 17 percent since the beginning of October, and MSCI's global equity index has recouped all its losses since the U.S. debt debacle last summer.

This suggests that roughly half of the 25 percent gain in the price of Brent crude since early October reflects a strengthening of global demand, economists said. The world's factories are churning out goods at a faster pace, a key indication of the economy's strength, meaning it is in better shape to handle a supply shock from Iran than a year ago.

"We think that crude oil prices have risen more because of improving sentiment regarding global growth than because of geopolitical risk concerns," Deutsche Bank told clients.

WAGES CUSHION THE BLOW

A sterner test will be whether consumers can absorb the higher costs at the gasoline pump, since their spending accounts for about two-thirds of all economic activity in developed economies. And that will depend upon wage gains.

So far, the news here is reasonably encouraging too. American wages and salaries have risen at a 5.7 percent annual rate in the seven months through January. Average hourly earnings, to be reported on Friday as part of the government's monthly jobs report, are expected to have advanced by 0.2 percent in February from the prior month.

U.S. gasoline costs have accelerated at an even faster pace. They are up by 10 percent from their lows late last year and in California have topped the psychologically important $4 a gallon level. But so far the hit to the American wallet has been less severe than during the Arab spring a year ago.

A warm winter and a 30 percent plunge over the past three months in prices for natural gas, the fuel used to heat most American homes, have cut the average household energy bill. And more people have jobs today, providing more of a cushion to absorb costlier gasoline.

"So far there is no sign that these higher prices are getting in the way of an improving trend in U.S. consumer confidence currently supported by a better labor market," said Jacques Cailloux, chief European economist at Royal Bank of Scotland.

The U.S. jobs report for February due out on Friday is expected to show 210,000 new jobs were added outside the farm sector, the third month in a row of gains above 200,000. Tom Porcelli, chief U.S. economist at Royal Bank of Canada, said he will watch closely for signs of growth in higher-paying sectors, which would provide further support to consumer spending.

Otherwise, rising gasoline costs could start to bite. Porcelli said three to six months above $4 a gallon could shave half a percentage point off U.S. GDP, which economists currently see expanding around a 2.2 percent rate in 2012.

INFLATION RISKS

The dent could be even larger in Europe, where wages are lagging. Adjusted for inflation, the Organization for Economic Cooperation and Development estimates that wages in the euro zone this year will expand on average by 0.4 percent, and even less for Germany, Europe's biggest economy.

Deutsche Bank reckons that if oil were to rise by 50 percent from its baseline, twice the advance so far, it would rob 0.4 percentage point from euro zone GDP in the first year. The region already is expected to contract slightly in 2012.

In Asia, the picture is more mixed and inflation the primary concern.

Many Asian economies have fuel subsidies, which would cushion the blow to households. But if governments start to pass on the energy costs, as Deutsche expects in India and Indonesia, inflation could rise sharply.

Inflationary pressures would complicate the role of central banks, possibly quashing prospects for further monetary support for the recovery.

But for now, rising oil prices largely are a growth story.

US to increase farm export tie up with major exporters

NEW YORK (Commodity new world): US is likely to increase the farm exports tie up with major importers especially with Asian nations to preserve this year’s record profit and exports.

Tom Vilsack, agriculture secretary, will lead a trade mission to China at the end of March to strengthen the trade tie ups.

China has become one of the major trade partner of US as the country purchased $20 billion worth US agricultural exports.

According to USDA, Farmer net income will reach $91.7 billion this year.

Meanwhile, increase in agriculture production is needed to meet world food needs, with the global population expected to increase by more than 2 billion by 2050.