Copper rises on higher oil prices

Copper rose more than 4 per cent on Monday on higher oil prices and the weaker...

Copper rose more than 4 per cent on Monday on higher oil prices and the weaker dollar but analysts expected the rally to be short lived because the outlook for the metal remains bleak as demand dwindles.The metal, used in construction and power facilities, has lost almost 60 per cent in value this year and is expected to remain weak in 2009 due to the global financial crisis.“There is still a lot of fear and that is going to weigh on any rally,” a broker at Sucden said. “The rallies will probably be sold into in the new year.”“We are still in the middle of the recession that would definitely hurt metal demand,” an LME dealer in Shanghai said.Copper for three-month delivery on the London Metal Exchange rose 4.1 per cent to a high of $2,940 (U.S.) a tonne from $2,825 at the close on Wednesday, the last trading session before the holidays. It closed at $2,905 a tonne.Base metals can benefit from stronger oil prices as they often raise investors’ interest in commodities as an asset class, while the weaker dollar makes the metals cheaper for holders of other currencies.Oil rose above $42 a barrel in reaction to the violence between Israel and Hamas on fears of supply disruptions before paring gains.The U.S. dollar fell broadly, eroded by a grim outlook for the U.S. economy and concerns Israeli attacks in the Gaza strip will heighten tensions in the Middle East and threaten oil supplies.A move by China to stockpile tin and aluminum had little impact as market participants awaited further clarity on the deals, traders said.Top Chinese tin producer Yunnan Tin has proposed selling 30,000 tonnes of tin ingots to Yunnan province for its planned base metal reserves, a company executive said.Tin was last bid at $9,750 a tonne from $9,850.The move follows China’s State Reserves Bureau (SRB) agreement to buy about 300,000 tonnes of aluminum at around 12,300 yuan ($1,800 U.S.) per tonne in January to support producers, trading and industry sources said last week.“It is positive if it’s going to happen,” the Sucden broker said.Aluminum closed at $1,511 a tonne from $1,540, lead jumped to $920 from $875.5, and nickel was up at $9,700 from $9,600.Zinc was last bid at $1,132 from $1,144.