LONDON, March 31: Refined sugar prices have struck fresh all-time peaks this week on speculative buying fuelled by strong demand and tight supplies, but traders and analysts said on Friday the market risked a correction lower.

Benchmark May white sugar futures inched up $1.20 or 0.25 per cent to a session peak of $480.40 per ton in morning trade, just below a record high of $480.50 touched on Thursday.

Supply is tight, and importers haven’t been deterred by high prices, said Sergey Gudoshnikov, senior economist of the International Sugar Organization (ISO).

But the Brazilian crop is just around the corner, he added, referring to the imminent start of harvesting in the centre-south of the world’s top sugar producer.

The mood at the London sugar trade dinner on Thursday was bullish, although some traders were worried about the impact of volatile price moves.

One trader said the strategy of investment funds that had piled money into sugar was highly unpredictable.

Expectations of increasing allocations of Brazilian cane to make ethanol to power “flex fuel” cars was a major factor behind the surge in raw sugar prices to 25-year highs last month.

Raw sugar futures closed at a peak of 19.30 cents per lb on February 3.

With crude oil prices near record highs, interest in ethanol increases as it is cheaper and more environmentally friendly.

Sugar has been swept along by heightened investment fund interest in commodities, notably in metals, and the sweetener is now among the strongest performing commodities this year.

Traders noted warning signs that sugar’s rally could yet lose momentum.

Some in the trade are worried about the lack of offtake so expect another downward move to attract final buyers, UK broker Sucden said in a daily research note.

The sugar market is in deficit. Asian demand is robust, it said. In addition, global sugar stocks are declining.—Reuters