By Thomas Kutty AbrahamFeb. 9 (Bloomberg) -- Copper, crude oil...

By Thomas Kutty Abraham

Feb. 9 (Bloomberg) -- Copper, crude oil and sugar are the top picks among commodities, with the three set to gain on increasing emerging-market demand and supply constraints as the global economy recovers, according to Morgan Stanley.

Oil is ?by far is our biggest bet among commodities,? Hussein Allidina, head of commodity research, said in an interview. ?Copper remains the best pick among base metals as it has all the factors supporting oil.?

The Reuters/Jefferies CRB Index of 19 raw materials slumped to the lowest since October last week on concern that swelling government deficits in European nations may restrain growth in the region and spur a rise in risk aversion worldwide. The declines presented a buying opportunity, Allidina said.

?I?m optimistic, and I don?t think the EU contagion will unfold,? Allidina said yesterday in Dubai, where he?s attending a conference. ?If the situation in the European Union can be addressed without any contagious effect, commodities will continue to perform well.?

European leaders will meet on Feb. 11 to discuss the outlook, including in Greece, which has a deficit of 12.7 percent of gross domestic product, more than four times the region?s ceiling. The Dow Jones Industrial Average closed yesterday below 10,000 for the first time since November amid concern that European government finances will harm the recovery.

?Augurs Well?

Still, rising demand and supply constraints will help to boost commodity prices, Allidina said. Economic growth of 6.5 percent in emerging markets ?augurs well? for oil demand, and the Organization of Petroleum Exporting Countries may need to raise output in the second-half of 2010, he said.

Oil for March delivery traded at $71.57 a barrel, 32 cents weaker in after-hours on the New York Mercantile Exchange at 8:25 a.m. in Singapore. Prices tumbled to a seven-week low of $69.50 on Feb. 5 amid the commodity selloff.

New York oil futures will rise to $95 a barrel by the end of the year as demand recovers, Allidina said on Jan. 25. Declining crude stockpiles and an improving global economy will boost oil to an average of $100 in 2011, he said then.

Mohammad Ali Khatibi, Iran?s OPEC governor, said yesterday that global oil supply is enough to meet demand in the first half. OPEC has left output levels unchanged since December 2008, when it announced the largest supply cut in the group?s history as world demand collapsed amid the financial crisis. OPEC next meets on March 17 to consider supply targets.

?There?s a real rationale to be invested in sugar, at least until March? when the Brazilian harvest begins, Allidina said. The sweetener will extend gains as a deficit was expected to last through the season ending Sept. 30, he said.

The global sugar deficit may expand 43 percent to 11.9 million metric tons in the year to April 30, compared with an October forecast of 8.3 million tons, Switzerland-based Kingsman SA said yesterday. Raw sugar reached a 29-year high on Feb. 1 after more than doubling in 2009 as bad weather cut production in Brazil and India, the top producers.

Among other farm products, corn will be a better bet than soybeans as Argentina and Brazil are set to harvest bumper crops, he said. ?Soy will bleed and one should be short,? he said.