Commodities rise most since 1959

OIL, GAS SURGE

Commodity prices surged the most since 1959, when Dwight Eisenhower was U.S. president, as energy prices soared on concern Tropical Storm Rita might disrupt fuel production in the Gulf of Mexico area.

Gold climbed to a 17-year high, and copper and cotton gained.

The Reuters/Jefferies CRB Index of 19 commodities rose 12.06, or 3.8%, to 327.45 at 3:08 p.m. in New York, the biggest gain since Sept. 22, 1959. The index has climbed 19% in the past year, reaching a 24-year high of 337.18 on Sept. 2, as economic growth in China and India spurred demand for fuel and raw materials to build homes, cars and appliances.

Rita headed toward southern Florida on its way to the gulf and was forecast to strengthen into a hurricane by tomorrow.

Crude oil, natural gas, gasoline and heating oil surged to records after Hurricane Katrina hit land on Aug. 29, slashing gulf output.

“ When you have a period where demand is putting pressure on prices, and then you have a supply shock, you get a price spike,” said Terrence Martell, a professor of finance and director of the Weissman Center for International Business at Baruch College in New York. Commodities are benefiting from the “double whammy” of reduced supply and growing demand, he said.

Natural gas jumped to a record today, and copper had its biggest gain in 11 months. Orange juice gained 3% amid concerns about the crop in Florida, the world’s second-biggest grower of oranges after Brazil.

Gasoline soared 14%, and cotton gained 4.4%.

Gold rose in New York for a fourth straight session, extending a rally to a 17year high, as investors sought a hedge against inflation. Copper climbed 4%, the biggest increase since Oct. 29.

“ The fundamental upward pressure on commodity prices is driven by demand factors, not the least of which is several hundred million people joining the middle class in India and China and the demand for goods those several hundred million people require,” said Martell, who is also a director of the New York Board of Trade. “What you’re seeing is a market that is primed to react to supply shocks.”

Natural gas reached $12.70 per million British thermal units, the highest ever. Gasoline rose as high as US$2.049 a gallon, up more than 26¢ .

Bloomberg News