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Commodity market update: Iron ore surges, thermal coal gains momentum

While gold slid, and oil again notched up a losing week, iron ore continued its charge higher, and thermal coal prices had their strongest week in months – both of which should be good news for Australian resource companies.

The fall in gold and oil prices won’t help shares in those sectors, even with the spectre of the $80 billion merger talk around Woodside (down) and Santos (up).

Iron ore ended at $US135.20 a tonne, marking the highest weekly and daily close for more than a year.

Thermal coal prices in Newcastle leaped 14% over the week, the most significant rise in months, reaching $US151 a tonne, and lithium prices stopped falling amid talk of a looming rebound. However, Chinese EV sales growth continues to grow slowly compared to earlier this year.

Copper prices rose again on Friday, with the Comex front month ending at just over $US3.83 a pound, but that was down 10 US cents a pound from the $3.93 close the previous Friday.

Oil prices firmed a little on Friday but were still down more than 4% for both Brent and US West Texas Intermediate crude.

In January, WTI crude oil on Friday closed up + $US1.86 (+2.68%) at $US71.23, and Brent ended higher at $US74.65 after settling higher at $US75.85.

The number of oil and gas rigs rose by one last week, according to energy-services firm Baker Hughes. The count for oil fell to 503 from 505, while the number of gas rigs grew by three to 119. Miscellaneous rigs were unchanged at four.

A year earlier, the US had 625 oil rigs, 153 gas rigs, and two miscellaneous rigs in operation, the company’s data showed.

Overall, there were 626 rigs operating in the US last week, compared with 780 a year earlier.

Crude rallied on Friday after stronger-than-expected US jobs data and December consumer sentiment reduced recession fears and bolstered the outlook for a soft landing ahead of this week’s Fed meeting, a positive factor for energy demand and crude prices.

Crude prices found support on Friday after the US Energy Department issued a solicitation to buy as much as 3 million bbl of sour crude for delivery in March to refill the strategic petroleum reserve.

This came on top of a previous tender to buy the same amount for February. The Energy Department said it would hold monthly tenders to buy oil to refill the reserve through at least May of next year.

Meanwhile, the OPEC’s “announcement of deeper production cuts should support physical balances, but the market will have to be convinced before any of these cuts are priced in,” Australia and New Zealand Banking Group said in a Friday note.

“The lack of details in the announcement opens the possibility of producers sidestepping their commitments.”

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