Commodities markets summary

Reported by AAP
Friday, April 24, 2015
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A summary of trading in key commodities markets overseas:

ENERGY

Global oil prices have advanced as the Saudi Arabia-led coalition renews airstrikes in Yemen, stoking new supply concerns about the crude-rich Middle East.

US benchmark West Texas Intermediate for June delivery gained $US1.58 ($A2.04) at $US57.74 a barrel on the New York Mercantile Exchange on Thursday.

Brent North Sea crude for June delivery, the global benchmark, advanced $US2.12 to $US64.85 a barrel.

"The market may be drawing support from Saudi Arabia's resumption of airstrikes against Houthi rebels in Yemen, with an increased geopolitical risk premium helping to offset weaker-than-expected PMI data from both China and the eurozone," said Tim Evans of Citi Futures.

The Saudi-led regional alliance declared an end to the airstrikes against the Iran-backed Huthi rebels and their allies on Tuesday, but vowed to keep hitting them with targeted bombing when necessary.

Yemen is not a major oil-producing country, but its coast forms one side of the Bab el-Mandeb Strait, the key strategic entry point into the Red Sea through which some 4.7 million barrels of oil passes each day on ships headed to or from the Suez Canal.

"Increased instability around the Bab el-Mandeb could keep tankers in the Persian Gulf from reaching the Suez Canal or the Sumed Pipeline, diverting them around the southern tip of Africa, adding to transit time and cost," the US Department of Energy warned in a report on Thursday.

"In addition, European and North African southbound oil flows could no longer take the most direct route to Asian markets through the Suez Canal and then on to the Bab el-Mandeb."

Evans said WTI was lagging Brent because it was still under pressure due to the rise in US crude inventories for the 15th straight week, to a record 489,000 barrels for this time of year.

PRECIOUS METALS

Gold rose from a three-week low on Thursday, following its biggest drop in over a month on Wednesday, as the dollar retreated on weaker-than-expected US economic data.

Spot gold was up 0.8 per cent at $US1,197.35 an ounce, after touching its lowest since April 1 at $US1,183.65.

Commodities were broadly higher as oil touched its highest price this year. The bellwether Thomson Reuters/Core Commodity CRB index rose over one per cent.

Gold fell 1.3 per cent on Wednesday, its biggest daily decline since March 6, pressured by a stronger dollar after US home resales surged to a one and a half year high in March.

US gold futures for June delivery settled up 0.6 per cent at $US1,194.30 an ounce.

Bullion's rebound from lows came as the dollar struggled for momentum after data showed new claims for jobless benefits rose last week for a third straight week.

Separately, growth in the US manufacturing sector dipped more than expected in April, while home sales recorded their biggest drop in more than one and a half years in March.

"We're reacting to the dollar's move (on) the lower-than-expected housing data," said Howard Wen, precious metals analyst at HSBC in New York.

Market focus was expected to shift to the Federal Reserve's policy meeting later this month, as traders look for stronger clues about the timing of an interest rate rise.

"We are forecasting a June rate hike so they should make some more nods towards it this month," Macquarie analyst Matthew Turner said.

Markets were also watching the unfolding Greek debt crisis.

Greece can scrape together enough cash to meet its payment obligations into June, euro zone and Greek officials said on Wednesday, playing down fears of an imminent default even as hopes receded of a deal with creditors to release fresh aid.

Elsewhere, China's factory activity contracted at its fastest pace in a year in April, a private survey showed, suggesting economic conditions are still deteriorating.

Demand in top bullion consumer India was expected to return to subdued levels following the gold-buying festival of Akshaya Tritiya on Tuesday, Commerzbank said in a note.

Spot silver was up 0.8 per cent at $US15.90 an ounce, recouping most losses after hitting a one-month low on Wednesday.

BASE METALS

Industrial metals prices softened after a weak Chinese manufacturing survey reinforced worries about demand, while aluminium was also pressured by news China will remove export taxes on rods and bars.

Three-month copper on the London Metal Exchange sank to $US5,864.50 a tonne, its lowest since March 20, from Wednesday's last bid of $US5,910. It closed at $US5,940 a tonne.

China's factory activity contracted at its fastest pace in a year in April, a private survey showed, suggesting economic conditions are still deteriorating despite increasingly aggressive policy easing by the central bank.

"We haven't seen a strong pickup in (copper) demand in China after the New Year holiday, though there are tentative signs," said Caroline Bain, senior commodities economist at Capital Economics.

"(But) the risks to mine supply haven't faded and we don't see a collapse for copper demand in China, so we're cautiously positive."

Copper has been consolidating since hitting near six-year lows in January, as unexpected supply disruptions spurred analysts to cut their 2015 surplus forecasts.

But the metal has been unable to capitalise more recently on the supply story as demand disappoints in China.

Aluminium ended down 1.6 per cent at $US1,777.5 a tonne from Wednesday's close at $US1,806. Earlier it fell to $US1,769 a tonne, its lowest since March 14 after China said it will remove taxes on exports of non-alloyed and alloyed aluminium rods and bars from May 1.

"Excess Chinese aluminium output has therefore become a key determinant of international prices," Natixis said in a note.

27/04/2015 01:40Sydney, Australia. 27 April,2015
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