Cold and floods send fuel prices to new highs

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Cold and floods send fuel prices to new highs

Crude oil and thermal coal prices set fresh 27-month highs on the first session of the new year and added to inflationary concerns in developing economies.

The surge came amid a forecast of cold weather in the US, the world’s biggest oil consumer, robust growth in the manufacturing sector in Asia and Europe and heavy flooding in Australia, the world’s second largest thermal coal exporter.

The mix propelled Brent crude, the global benchmark, above $95 a barrel for the first time since October 2008.

Lawrence Eagles, head of oil research at JPMorgan in New York said in a note to clients: “$100 a barrel oil looms.

“Oil sentiment has turned decidedly bullish, partly driven by unusually cold weather, but more due to an increasingly optimistic consensus view on 2011 economic performance, especially for the US.

The surge in oil and thermal coal prices adds to already rising inflation in emerging countries, some of which are big importers of energy commodities. China, where the central bank has raised interest rates to fight rising prices, is the world’s second largest importer of both oil and thermal coal. India is also a large buyer.

In London, ICE February Brent surged to an intraday peak of $96.47 a barrel on thin trade becaiuse of a UK public holiday. It later traded up 87 cents to $95.62.

The price of coking coal, used in making steel, has also soared. Australia accounts for about two-thirds of the global seaborne market for coking coal.

Elsewhere in commodities markets, precious metals rose amid strong demand from investors, partly exacerbated by New Year’s money allocation shifts.

Agricultural commodities prices also rose, with strong gains for wheat and oilseeds, on the back of bad weather in key growing regions in Australia, Indonesia and Latin America. Meteorologists have blamed the bad weather on la niña, a recurring phenomenon, caused by a fall in water temperature in the tropical Pacific.

The phenomenon could alter rainfall and temperature patterns across some of the world’s most important tracts of agricultural land, and has triggered unusually strong downpours in Australia and Indonesia and drought in Argentina and Brazil.

In Paris, Euronext February rapeseed rose above the €500 per tonne level for the first time in almost three years. It hit an intraday high of €506.0 per tonne, up 1.8 per cent. Rapeseed prices peaked €521.5 a tonne in March 2008.




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