Aluminium long position on LME biggest since Nov 2014: Analysts

Aluminium hit the highest in over eight months on Friday, April 22, but many analysts were wary that prices were stretched and could be due a correction lower with demand still patchy.

Strong buying lifted metals in the European afternoon as stops were hit and speculators chased prices higher after they rallied on Thursday, last week, partly on optimism about an economic rebound in top metals consumer China.

But many analysts have said underlying supply and demand do not justify the extent of the price gains.

"The price increases are exaggerated, so I would expect to see setbacks or corrections in the short term because much of the price rises were driven by greater risk-on sentiment and by speculators," said analyst Daniel Briesemann at Commerzbank in Frankfurt.

Three month aluminium closed up 1.1 per cent at $1,653 a tonne after surging as high as $1,667.50, the strongest since July 29 last year.

The extent of speculators pushing up aluminium was highlighted by estimates from Marex Spectron showing the speculative long on the LME this week had grown to 4.7 per cent of open interest, the largest long seen since November 2014.

Metals also got support from firmer oil prices, heading for a third straight week of gains as market sentiment turned more upbeat despite persistent oversupply.

Commodities prices have been lifted by a wave of speculative investment, backed by a credit-driven pickup in Chinese demand, with base metals caught up in a surge in iron ore prices, said analyst Lachlan Shaw at UBS in Melbourne.