JPMorgan Chase & Co's commodities trading risk steadied in the fourth quarter after a rally in oil, metals and grains, marking a shift from the third quarter when it cut risk to pare back on proprietary trading.

Value-at-Risk (VaR) for commodities at JPMorgan stood at $14 million in the fourth quarter compared with $13 million in the third quarter, the U.S. investment bank said in earnings results released on Friday.

VaR is a standard industry measure for how much of a bank's money is at risk on any given day for trading a particular market.

JPMorgan's commodities VaR stood at $20 million in the second quarter, before it began winding down proprietary trading in commodities and other financial instruments to comply with U.S. regulations limiting how much of its own money a bank can use to trade.

JPMorgan typically leads Wall Street's top-tier banks in reporting earnings for a quarter and its results have been a good indicator in the past for the rest of the industry.

It wouldn't be surprising to see a similar trend when some of the other big banks report their commodities VaR as they'd have taken advantage of the market too in Q4, said David Morrison, market strategist at GFT Global Markets in London.

Commodity markets, as measured by the Reuters-Jefferies CRB index, finished up 17 percent last year, with much of the gains coming after September.

The past year had been particularly volatile for JPMorgan's commodities business, even when markets had been quiet at times.

The No. 2 U.S. bank had started 2010 with an ambitious plan to expand commodities trading by taking over the global metals and oil business of RBS Sempra, the commodity joint venture of U.S. power company Sempra Energy and Royal Bank of Scotland.

Months before the deal was concluded in July, some RBS Sempra traders had begun leaving the firm, in an apparent objection to the takeover.

In October, the Wall Street Journal reported that JPMorgan's aggressive push into commodities trading would fall short of revenue goals for last year, and the business would be re-evaluated if it lagged again in 2011.

Barring a remarkable turnaround, JPMorgan would not meet a $1.78 billion revenue goal for commodities because of a string of problems including a bad bet on European coal prices and employee defections, the newspaper said.

JPMorgan does not break down its earnings for commodities. But it said revenue from fixed income, which includes commodities, stood at nearly $2.9 billion in the fourth quarter, little changed from a year earlier, but down from $3.1 billion in the third quarter.

Fourth-quarter earnings as a whole jumped, but much of the gain came from money previously set aside to cover bad loans.

In early December, JPMorgan announced cuts to its energy trading operations in Singapore, continuing with earlier consolidations in the United States as banks moved to comply with regulations limiting proprietary trading.

Late last month, JPMorgan's commodities business was uncomfortably in the spotlight again after reports that it had amassed a larger long position in copper and was unwinding a big silver short.

(Editing by Dale Hudson)