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China Demand Impacts Oil

Commodity markets rallied last week as risk appetite was bolstered by evidence of strengthening activity in China, better-than-expected US corporate earnings and US$ weakness. In Crude Oil markets, Nymex August West Texas Intermediate pushed above the US$63 bbl mark last Friday, rising US$1.54 to US$63.56 bbl, up 6.1% on the week. ICE September Brent rose US$1.63 to US$65.38 bbl, a gain of 8% on the week. Chinese refineries produced record volumes in June, up 7.8% year on year, while domestic crude output continued to decline, increasing demand for supplies from the international market. Barclays Capital said refinery demand for crude was likely to remain high as China strove towards self-sufficiency.  Base metals have seen substantial upgrades in price forecasts for 2009 and 2010, according to the latest Reuters poll. Last week sentiment was boosted further by data that showed stronger-than-expected growth in Chinese gross domestic product in the second quarter. Copper gained 9.4% at US$5,315 a tonne over the five sessions. Aluminium prices hit a fresh 2009 peak last Friday at US$1,735 a tonne before easing back to US$1,705, up 8.5 %on the week, even though inventories have risen to more than 4.5m tonnes, a record. Gold inched 0.2% higher to $938 a troy oz last Friday and rose 2.8 % over the week.