White Sugar Gains Most in a Year as Record Oil Spurs Buying

White sugar climbed the most in more than a year in London as investors speculated that record oil prices will spur demand for alternative fuels such as ethanol, which can be made from the sweetener.

Crude oil rose to a record $82.51 a barrel in New York after a government report showed a larger-than-expected U.S. inventory decline. Sugar surged to a record $497 a metric ton in May last year, partly as record energy prices prompted some investors to buy sugar on expectations demand for ethanol would strengthen.
“A fund has clearly decided it wants to buy sugar,” Peter de Klerk, an analyst in London at commodities broker C. Czarnikow Sugar Ltd., said by phone today. “It’s someone who didn’t want to wait, and put an order in for a few hundred lots. The price is no object because sugar is relatively cheap compared to oil, wheat and corn.”

Refined sugar for December delivery, the most actively traded contract on London’s Liffe exchange, rose $10.80, or 3.9 percent, to $285.30 a ton. That’s the most compared with closing prices since September last year.

Prices earlier surged 9.8 percent to $301.30 a ton, the biggest jump compared with closing prices since at least January 1989. More than 10,100 contracts traded, compared with an average of 4,655 in the previous 30 days.

White sugar has slumped 28 percent in the past 12 months, partly as record prices spurred growers in India and Brazil, the world’s biggest producers, to boost plantings.

Bloomberg