MORNING CALL: CRUDE 111.76 +0.19%; COTTON 97.86 -0.31%; BDI 893 -3.56%

Crude prices gained in Asian trading buoyed by earlier economic data from the US showing that US jobless claimants dropped to the lowest level in almost four years while US DOE stock data showed an unexpected 3.4 million barrel draw in crude inventories. Adding to the bullish sentiment, EU foreign ministers plan to meet on 23rd January to decide on Iranian sanctions that could include an oil embargo.

The Baltic Dry Index continued to fall and is now at the lowest level since December 2009. Any recovery in the BDI is not expected until after the Chinese New Year holidays.

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MORNING CALL: CRUDE 111.22 +0.51%; COTTON 97.01 -0.53%; BDI 926 -4.93%

Asian markets for commodities were supported by the announcement that the IMF is to hike its lending facility by $500bn, sparking a decline in the dollar versus the Euro.

Meanwhile sentiment was also buoyed by the announcement earlier in the day that Chinese 2011Q4 GDP came in stronger than expected at 8.9%.

In cotton markets, news that China’s cotton planting area is expected to fall by 10.5% in 2012 supported prices earlier in the session before the market gave up the earlier gains.

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Base metal price forecasts revised down, copper likely to shine

The last two weeks have coincided with a flurry of base metal forecasts for the year ahead from the commodity research departments of investment banks. Goldman Sachs, Barcap and Morgan Stanley all lowered their forecasts for aluminium prices in 2012 due to increased supplies but argued that growth in the US and China will offset weakness in Europe so that prices will average around $2300 per tonne for the year. As of this morning LME aluminium was trading around $2200 per tonne.

While there was general consensus regarding average 2012 aluminium prices there was a much greater divergence of opinions regarding the outlook for copper. Morgan Stanley forecast average 2012 copper prices at $8157 per tonne, Goldman Sachs at $8567 per tonne and Barcap at $9000 per tonne. All banks cited excess demand over supply as being supportive of copper prices (Goldman Sachs expects a shortage of 202,000 tonnes in 2012 against 198,000 tonnes in 2011) while Morgan Stanley argues that dollar strengthening will weaken demand for commodities in general including copper. Copper currently trading around $8300 per tonne.

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