The strength of the economy is measured by the strength of the stock market. The strength of economic development is also measured by the strength of demand for commodities. The demand for seasonal "soft" agricultural commodities, such as wheat and rice is influenced by weather conditions. The demand for "hard" commodities, metals and oil, is a direct result of economic development.

There are two benchmarks for the hard commodities. The first is the price of oil and this is reflected by the NYMEX oil price. This week we consider the oil price outlook. The second benchmark is set by the copper price as traded on the London Metals Exchange (LME). The behavior of this LME price is slightly different to the behavior of price on the Shanghai Futures Exchange. We look at these differences in the column next week.

The oil price increased by more than 100 percent in 2009 before running into resistance around $80. Oil moves in well defined trading bands, with rapid breakouts. This behavior is most clearly seen on a weekly chart. During the second half of 2009 oil attempted to create a new trading band extending from $58.00 to $72.00. This was slightly wider than the historical trading band which stretched between $58 and $69.