Copper Fluctuates on Report of Libya Mediation, Stocks at Seven-Month High

Copper fluctuated in London as investors weighed a report of mediation to end the crisis in Libyaagainst inventories of the metal at a seven-month high.

Libya’s Muammar Qaddafi and Venezuelan President Hugo Chavez have discussed a peace proposal, the Associated Press reported. Crude fell the most in a week in New York after rising above $100 a barrel last week as violence escalated in the North African country, curbing oil production and stoking concern that higher energy costs might hurt metals demand.

“Certainly the market will also be watching the Libyan situation closely with Hugo Chavez entering the fray,” said Daniel Brebner, an analyst at Deutsche Bank AG in London. “It may moderate risk perceptions near-term.”

Copper for three-month delivery rose $5, or 0.1 percent, to $9,895 a metric ton by 10:09 a.m. on the London Metal Exchange. Prices added as much as 0.2 percent and slid as much as 0.7 percent. Copper for May delivery gained 0.1 percent to $4.504 a pound on the Comex in New York. All of the six main metals traded on the LME advanced.

LME copper stockpiles, up 12 percent this year, gained 0.1 percent today to 424,050 tons, with the biggest increase in Singapore. Orders to draw copper from stocks, or canceled warrants, dropped 5.2 percent to 16,850 tons, a fifth decline.

ECB Policy

The European Central Bank will keep its benchmark interest rate at a record low of 1 percent today, according to economists surveyed by Bloomberg. ECB President Jean-Claude Trichetmay tell investors how he plans to cope with an oil-price shock that’s driving inflation beyond the bank’s limit while also threatening to damp economic growth.

“All eyes will be on Europe this afternoon as the ECB becomes the first large central bank to announce a policy decision since the Middle East crisis deepened and oil prices surged,” John Meyer, an analyst at Fairfax IS in London, said in a report.

The ECB will announce its rate decision at 12:45 p.m. London time, and Trichet will hold a press conference 45 minutes later.

Rising world inflation is a concern for metals demand, said Charles Cooper, an analyst at Oriel Securities Ltd. in London. Higher prices in the so-called BRIC countries, combined with tightening measures in China, may push prices lower, he said.

“Any tightening measures that the ECB puts in place could play against the sentiment for commodities,” Cooper said. Europe accounts for about 12 percent of industrial-metals consumption, he said.

Aluminum for three-month delivery on the LME rose 0.3 percent to $2,610 a ton. The lightweight metal may reach $3,000 in the next 12 months, Laredo, Texas-based researcherHarbor Intelligence said in a report.

Zinc added 1.3 percent to $2,512 a ton and lead gained 0.9 percent to $2,588 a ton. Nickel advanced 0.8 percent to $28,830 a ton and tin rose 0.1 percent to $31,625 a ton.

(Source: http://www.bloomberg.com/news/2011-03-03/copper-fluctuates-on-report-of-libya-mediation-stocks-at-seven-month-high.html)