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Copper, oil likely to track drops abroad

By Michael Bellart  (Global Times)

08:22, May 28, 2012

Copper and crude oil futures dipped after the Chinese mainland markets closed Friday, setting the stage for a decrease in domestic prices as the central government announced no further policy easing over the weekend and the European debt crisis showed signs of spreading.

Nymex West Texas Intermediate (WTI) crude oil for July delivery lost 0.78 percent after 3 pm Beijing time Friday. The contract settled at $90.86 a barrel, down 0.68 percent for the week. Meanwhile, the benchmark three-month copper contract on the London Metal Exchange (LME) slipped 0.21 percent to end at $7,627 per ton, down 0.41 percent for the week.

As the world's largest copper consumer, China remains one of the few potential bright spots for the global market, especially after Premier Wen Jiabao said last week that the government should take measures to spur economic growth, following the release of a series of lackluster economic data. Metals markets rallied in Wen's words, anticipating increased government spending would boost metals demand.

Domestic copper consumers appear to have been reluctant to buy, despite record imports this year. Stockpiles monitored by the Shanghai Futures Exchange (SHFE) rose to their highest level in nearly a decade earlier this year. In China's bonded areas, which the exchange barely tracks, stocks amounted to at least 650,000 tons, according to the Australian bank ANZ.

There have been signs of a turnaround. SHFE stockpiles have since come down significantly, falling 9.39 percent last week to 157,489 tons, according to the latest data.

Some market watchers had expected the government might announce additional pro-growth measures over the weekend, but nothing had materialized as of 4 pm Beijing time yesterday.

It remains too early to determine whether additional demand will affect prices or offset uncertainties from Europe. The most active SHFE copper contract has fallen 9.8 percent from its year-to-date peak on February 8 due to the latest flare up of the European debt crisis.

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