MORGAN STANLEY: Oil, Copper, Sugar Are Best Commodity Picks - Morgan Stanley Says

Copper, crude oil and sugar are the top picks among commodities, with their prices set to rise due to increasing emerging-market demand and to supply constraints as the global economy gets back on track, according to Morgan Stanley.

Hussein Allidina, head of the bank"s research department, says: "Oil is by far our biggest commodity bet. Copper remains the best pick among base metals".

Hussein Allidina says that growing demand for raw materials (due to the economic recovery), and supply constraints will raise the prices of commodities.

For instance, the economic growth of 6.5 percent in emerging markets "bodes well" for oil demand, and the Organization of Petroleum Exporting Countries may need to raise output in the H2 2010, he said.

New York oil futures will rise to $95 a barrel by the end of the year as demand recovers, Allidina said. Declining crude stockpiles and the recovery of the world economy will boost oil to an average of $100/barrel in 2011, he said.

Yesterday oil traded above USD72/barrel in New York.

Mohammad Ali Khatibi, Iran"s envoy with the OPEC, said this week that the global oil supply currently covers demand, and there will be no disruptions in the first semester of 2010. OPEC hasn"t modified its output quotas since December 2008.

Hussein Allidina also said that the price of sugar will rise due to a shortage which is expected to last until the end of the harvest year, (September 30th).

According to Swiss consulting firm "Kingsman" SA, the global sugar deficit may expand 43% in the year to April 30, compared to the company"s previous forecast of 8.3 million tons, in October.

On February 1st, the price of raw sugar reached the highest level in the last 29 years, after nearly doubling in 2009, compared to 2008, due to shrinking of crops in Brazil and India, the largest makers of sugar. Currently sugar exceeds 27.28 cents/pound on the New York market.