Most commodity markets made modest gains in cautious summer trading on Tuesday, while sugar prices consolidated after very strong gains in the previous session.
Nymex September West Texas Intermediate rose 10 cents lower at $70.70 a barrel and ICE September Brent gained 14 cents at $73.64 a barrel.
Traders expressed surprise at the lack of market reaction to strong data from China which showed crude oil imports at 4.62m barrel per day in July, a monthly record and up 42 per cent compared with the same period last year.
So far this year, Chinese crude oil imports have risen 5.8 per cent compared with the same period in 2008.
“The strong rise in crude oil imports is only to a certain extent attributable to a stronger domestic demand,” said Eugen Weinberg of Commerzbank: “Simultaneously, China’s exports of refined fuel surged by 31 per cent year-on-year in July. China is currently refining more crude oil than it actually needs.”
In the sugar market, Liffe October white sugar 0.6 per cent to $560.6 a tonne, following a jump of 3.8 per cent in the previous session and taking gains this year to 76.3 per cent.
ICE October raw sugar, the global benchmark, dipped 0.6 per cent to 21.86 cents a pound after jumping 5.7 per cent in the previous session.
Raw sugar prices hit 22.44 cents a pound in the previous session, the highest level since mid-1981.
The market is viewed as being in uncharted territory, having traded above current levels only on two previous occasions. Both involved massive spikes. Prices surged above 50 cents per pound in 1974-75 and 1980-81.
Raw sugar prices have already risen 85 per cent this year as bad weather has affected output in Brazil and India, the world’s two largest producers.
Poor monsoon rains in India, the world’s largest sugar consumer, have fuelled concerns that some of the country’s key agricultural growing regions could face drought.
Tuesday brought reports that sugar stocks in India had dropped to 6m tonnes in July, enough for three months of domestic consumption, from 7.6m tonnes in June.
Sugar inventories are estimated to be at record lows as many producers and physical traders maintain only minimal stock levels to reduce costs.
Analysts at Czarnikow, the sugar broker, have published a revised estimate for global sugar stocks of about 20m tonnes, well below the range of current market estimates of between 30m tonnes and 70m tonnes. China, India, Brazil, Europe and the US account for 65 per cent of all stocks.
“Aside from Europe and China which are carrying surplus stock, most countries are running short of sugar,” said Toby Cohen, director at Czarnikow. “This is the case even in the top five stock holding countries, as both India and the US need to increase imports in 2010 to prevent demand over-running supply.”
Mr Cohen warned that India’s stock position looked particularly vulnerable, with inventories on course to fall as low as 2.2m tonnes during the Diwali festival in mid-October, before new season supplies become available.
Czarnikow said low stocks were not only a problem in the developing world as the US stocks-to-consumption ratio could fall to 10 per cent this year, suggesting higher imports would be required.
In Chicago, trading in grains and soyabeans was cautious ahead of the US Department of Agriculture August crop report, due out on Wednesday.
CBOT September corn rose 3¼ cents to $3.27½ a bushel while CBOT September wheat added 2¾ cents at $4.98 a bushel, but CBOT August soyabeans increased 17¼ cents to $11.88½ a bushel.
The consensus view is for the USDA to revise its 2009/10 corn production forecast up from 12.29bn bushels to 12.508bn bushels, helped by higher yield estimates, up from 153.4 bushels an acre to 157.5.
The USDA forecast for the 2009/10 soyabean crop at 3.26bn bushels, a record, could be trimmed to 3.225bn bushels with yields expected to dip from 42.6 bushels an acre to 42.16 bushels an acre.
Rich Feltes of MF Global said the August crop report usually proved a better indicator of the final corn yield than the final soyabean yield. “The USDA has underestimated final soybean yields in three out of the last five seasons,” said Mr Feltes.