Oil edges up, soybeans rally; metals, cocoa slump

NEW YORK: Oil prices inched up on Tuesday, following stock markets higher, despite threats of a buildup in US crude supplies and economic worries in Europe, and soybean futures advanced their most in seven months on prospects of lower Argentine production.

Metals markets ended broadly lower.

Copper hit a three-week low, depressed by unease over top consumer China's limp return to the market from a week-long holiday. Gold fell near a six-month low, holding just above $1,600 an ounce, as an equities rally and signs of an improving global economic outlook dented bullion's safe-haven appeal.

Prices of soft commodities such as cocoa and coffee also tumbled.

Cocoa hit a 10-month low in London trade, pressured by a good supply outlook for West Africa's mid crops. Arabica, the premium coffee grade, fell as expectations for large global supplies pressured prices.

The 19-commodity Thomson Reuters-Jefferies CRB index settled flat after the run-up in oil, soybeans and two other markets -- natural gas and sugar -- offset the losses in metals, coffee and cocoa.

OIL TRACKS STOCK MARKET RALLY

Oil prices rose as traders grew bullish amid a rally in US stock markets, even as US pipeline bottlenecks and European economic concerns threatened to weigh on oil markets.

US equities indices are hovering near five-year highs on prospects for quicker economic recovery, healthy US corporate earnings and a spate of large corporate mergers. Wall Street's S&P 500 stock index rose by about 0.6 percent on Tuesday.

"Oil traders see the rise in equities and decide to buy oil too," said Tim Evans, analyst at Citi Futures in New York. "Some might expect more oil demand driven by the equities rally. But it's likely a correlated trade flow that isn't based on oil market analysis."

US crude's front-month contract settled up 80 cents at $96.66 a barrel.

London's Brent crude rose 14 cents to settle $117.52 a barrel after initially falling more than 80 cents on European economic concerns.

Oil ended up even as the operators of the 400,000 barrel per day Seaway Pipeline from their Oklahoma delivery point to southern Texas said the line would not be able to reach full capacity in the "foreseeable future," potentially leading to surplus crude in the US Midwest.

SOY UP ON WEAK ARGENTINE CROP OUTLOOK

Soybean futures jumped 3 percent, their biggest advance in seven months, on concerns about crop prospects in Argentina following disappointing rainfall.

The front-month soybean contract in Chicago initially broke above resistance at its 50-day moving average of $14.38 per bushel.

It then penetrated key resistance at the 100- and 200-day moving averages of $14.56 and $14.57, respectively, before settling at $14.70-1/4.

Argentine crop worries aside, soybeans also gained support from slow shipments from Brazil. China's returns to the buy-side of the market after Lunar holidays and follow-through buying after last week's rebound from one-month lows were other encouraging factors.

"We saw a shift in momentum late last week so it's technical and also the rains in Argentina, particularly in the south, were disappointing," said Sterling Smith, futures specialist for Citigroup.

Argentina is the world's third-largest exporter of soybeans after the United States and Brazil and is the world's largest exporter of soyoil and soymeal.