Commodities: Oil benchmarks post marginal gains, gold near three-month high

Oil benchmarks posted marginal gains in early Asian trading on Monday, as the global oversupply situation continued to impact investor sentiment. At 05:23 BST, the Brent front-month futures contract for July delivery was up 9 cents or 0.13% at $66.90 per barrel, while the WTI June contract was up 12 cents or 0.20% at $59.81.

Despite the latest Baker Hughes rig count showing the number of US oil drilling rigs falling by eight to 660, and the combined oil and gas count by six to 888, thereby marking the 23rd straight week of declines – oversupply concerns continue to persist.

Last week, the International Energy Agency (IEA) said the decline in US shale output was less than expected, and what was being lost in terms of supply volumes was being more than adequately supplanted by increases in production elsewhere including Saudi Arabia, Kuwait and the United Arab Emirates.

Meanwhile, lacklustre data on business investment in China and weaker-than-expected US industrial production and consumer confidence data published last week, were also seen weighing on the oil markets prompting concerns that an economic uptick in both the leading consumer markets for crude oil is anything but certain.

That meant gold, currently trading near three-month highs, saw further strengthening as the dollar lost ground against a basket of currencies including the euro.

After a fair bit of movement in either direction on Monday, COMEX gold for July delivery was trading down 0.11% or $1.40 at $1,223.90 an ounce, while spot gold was down 23 cents or 0.02% at $1,224.57. Continuing with precious metals, COMEX silver was trading at $17.62 an ounce up 5 cents or 0.30%.

Chris Beauchamp, senior market analyst, IG, said: “Gold saw a surge at the close of trading on Friday, lifted by the poor figures from the US. Equities seem convinced the US Federal Reserve will not be shaken from its course, but the idea that [Fed Chair] Janet Yellen and company will have to row back on their move to hike rates appears to have a greater number of adherents among gold traders.

"Nonetheless, the area around $1220 has marked the highpoint of gold bounces so we could see this rally fizzle as the current trading week gets underway.”

On the base metals front, a weaker dollar aided copper in ending the last week on a marginal high up $6 or 0.1% at $6412 per tonne on the London Metal Exchange. It hit the highest levels seen this far into the current trading year touching $6,481 at one point last week before retreating along with other base metals on disappointing data from China. Lead (down 1.1%), nickel (up 0.7%), tin (up 0.4%) and zinc (down 1.1%) made for a pretty mixed picture elsewhere in the market.

Switching to the agricultural commodities market, CBOT July contracts for corn (up 0.27%) and wheat (up 0.54%), as well as ICE July contract for cocoa (up 1.46%) were all in the green. However, ICE cotton (down 0.37%) and CME live cattle (down 0.84%) began the trading week lower.