Refined sugar futures shot to multi-year highs on Tuesday and traders said a supply squeeze could drive values through the key $300 resistance level soon. A Reuters news report of a purchase by Sudan of 70,000 tonnes of high-quality sugar from the Dubai refinery, helped push Liffe August futures to a front-month seven-year continuation high of $297.20 per tonne on Tuesday, traders said.
Front-month white, or refined, sugar futures are up 10 percent this year, with much of the push seen in recent weeks.
"$300 is in the sights now," one trader said.
Another trader said, "Does the market have the potential to break through $300? Yes. Will it? I don't know."
After hitting the latest contract high, front-month Liffe August white sugar futures eased back to stand up $3.20 per tonne or 1.11 percent on mainly trade buying to $290.50 per tonne in brisk volume of 2,243 lots at 1344 GMT.
Sugar traders were taken by surprise by the announcement of a European Commission plan last week to hold over sugar intervention stocks into next year, squeezing short-term availability of refined sugar, dealers said.
Reform of the heavily subsidised EU sugar trade regime is expected to eventually open up the market to stiff competition from low-cost developing countries and reduce production within the bloc, analysts say.
While supplies are tight, refined sugar demand from buyers in the Middle East and Africa remains strong as some had delayed purchases after deals fell through, market sources said.
They said Iraq was expected to buy a large tonnage of high-quality 45-ICUMSA white sugar after its mid-June tender for around 100,000 tonnes.
There was no immediate confirmation of any Iraqi deal.
Dealers said they believed stocks were low in white-sugar buying countries in the Middle East and North Africa.
Perception of a short-term supply squeeze has also stoked strong speculator and fund interest in white sugar futures, market sources said.