US copper futures erased gains to close lower on Friday, with quarter-end position adjustments and losses in the crude oil market leading the way down for the broader metals complex, analysts said.
"The markets are really cueing off of oil right now. Crude oil is leading the commodity complex around by the nose," said Ralph Preston, senior market analyst with Heritage West Financial in San Diego, California. US crude oil futures ended down more than $2 on Friday. Copper for May delivery ended down 4.15 cents at $3.8315 a lb on the New York Mercantile Exchange's Comex division, after dealing in a session range between $3.8025 and $3.9275, its loftiest price level since March 7.
Final estimated futures volumes totalled 12,606, down from Thursday's final count of 17,890 lots. Open interest in the market increased 1,661 lots to 100,318 contracts open as of March 27. The week, the active May copper contract is up more than 7 percent. Traders were not surprised to see prices pull back on Friday, especially ahead of the end of the first quarter next week.
"We're ending the quarter, so between today, on Sunday and Monday, you're going to see more of the same guys locking in some of this last week's upward move," said Larry Young, senior trader at Infinity Futures Inc, in Chicago.
On Thursday, copper prices rallied nearly 4 percent on the back of in-line US fourth quarter GDP data that showed the economy grow at an annual pace of 0.6 percent. On Friday saw bout of follow-through buying momentum after weekly inventory data from China showed copper stockpiles in warehouses monitored by the Shanghai Futures Exchange drop 18 percent, snapping a string of weekly increases in place since late January.
Analysts questioned whether or not the outflows were actually funnelling through to Chinese end-users or just finding their way into overseas warehouses. In London, stocks of copper fell by 1,975 tonnes to 115,250 tonnes on Friday, and are down more than 40 percent since the start of the year.
Fundamentally, copper's supply/demand balance remained critically tight, with falling global inventory levels and ever-present concerns about production problems highlighted in the International Copper Study Group's (ICSG) latest monthly bulletin.
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