METALS-Copper edges up as dollar weakens; spreads tighten
* LME copper cash-Nov backwardation could rise further
* LME data suggests 145,000-220,000 T of copper off warrant
* Surveys show slow, but gradual recovery in euro zone
(Adds details, quotes; previous SINGAPORE)
LONDON, Nov 6 (Reuters) - Copper ticked higher on Wednesday for a second session as the dollar weakened and investors kept up hopes of extended U.S. monetary stimulus.
Cash copper moved to a premium to forward contracts, putting pressure on a large short-position holder, traders said.
Three-month copper on the London Metal Exchange rose 0.4 percent to $7,187.25 a tonne by 1052 GMT after a small gain on Tuesday. It has shed 9.4 percent this year.
The most-traded January copper contract on the Shanghai Futures Exchange finished flat at 51,590 yuan ($8,500) a tonne, having touched a one-week low.
Copper has held to a range of $7,000 to $7,420 a tonne since early August, supported by steady demand from top consumer China and cheap liquidity in the United States after the Federal Reserve delayed tapering its bond-buying programme.
Copper's range has been becoming narrower and narrower, prompting many who following signals generated by charts to forecast that prices are due to break away.
"My guess is that when we break out, if we break out, it will be to the downside," said Stephen Briggs, metals strategist at BNP Paribas in London.
The 30 percent decline in LME copper stocks since June does not necessarily represent strong demand, but more likely material moving off-warrant, sometimes within the same warehouses, he added.
"Material is likely being shifted across a white line. You can't necessarily conclude that since LME stocks have been declining for four months that means the market's in deficit, as much as the bulls would like to."
Briggs expects a wave of stronger supply to pressure copper down to an average price of $6,675 a tonne next year.
In the short term, traders said copper prices could find nearby support if a large short position in November is forced to cover. Cash copper climbed to a $5 premium against the November contract from a $12 discount in mid-October. <MCU0-X3>
Reuters calculations based on LME data show that November's short position could be to hedge as much as 145,000-220,000 tonnes of metal that is not in the LME warehousing system. <0#LME-FBR>
This figure tallies with a drop in LME copper stocks and may suggest metal leaving warehouses is going into storage rather than for consumption. LME stocks have dropped by around 210,000 tonnes, or by one-third, from mid-June to around 470,000 tonnes, the most recent data shows. <MCUSTX-TOTAL>
Metals on Wednesday were supported by a slightly weaker dollar, which makes commodities priced in the U.S. currency cheaper for buyers outside the United States.
The euro rose against the dollar as uncertainty over how the European Central Bank will react to a sharp drop in euro zone inflation left investors wary.
Euro zone business surveys on Wednesday pointed to a continuing gradual recovery in the 17-country euro zone but one that remains painfully slow.
LME volumes were low, with traders reluctant to take positions ahead of a labour report from the United States and a major policy meeting in China.
"There might be some upside risk for nonfarm payrolls on Friday ... but metals are a bit directionless for now," said Alexandra Knight at National Australia Bank in Melbourne.
The United States will release its October labour market report at the end of the week. A sustained recovery in the job market is a precondition for the Federal Reserve to begin hauling back its commodity-friendly stimulus.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin ($1 = 6.0968 Chinese yuan)
(Additional reporting by Melanie Burton in Singapore; Editing by Dale Hudson)