Commodities: Oil, gold retreat but Chilean disruption seen supporting copper

Oil markets pared overnight gains in early Asian trading largely driven by a string of news from Saudi Arabia in recent days.

First the Saudis moved to raise the oil price for their exports to Asia, then posted a record March production figure of 10.3m barrels per day. It was followed by oil minister Ali Al-Naimi’s comments that the “oil price won’t rise by much.”

The developments added a further dimension to prevailing market uncertainty. The past five trading days have seen Brent, the global proxy benchmark, dip 4% in pre-Easter trading on news of the Iranian nuclear settlement, only to claw back 5% at the start of the week on comments from Saudi Arabia.

Wednesday trading has so far tempered marginally bullish sentiments yet again. At 07:16 BST, the Brent front month futures contract was trading down 1.18% or 70 cents at $58.40 per barrel, while the WTI was down 1.87% or $1.01 at $52.97 in Asian trading.

Gold retreated after touching a seven-week high on Tuesday following news of a stronger dollar, falling from $1,224.10 an ounce to $1,209.

Alastair McCaig, market analyst at IG, noted: “As the debate surrounding Iran’s willingness to meet the West’s requirements of its nuclear power experiments has reached a climax, oil prices have been unable to reach a conclusion as to their bullish or bearish reading into this.”

“The last week has seen both crude and US light oil squeeze higher as they have oscillated around the 50- and 100-day moving averages. Considering Iran would be the third-largest producing member of OPEC and arguably even bigger, these talks have preoccupied traders' thoughts.”

McCaig also said gold’s efforts to hang onto the ground it made last week is beginning to look unattainable as the gravitational pull of the $1,200 level looks destined to ultimately succeed.

Meanwhile, Chilean mining disruption appears to be countering sentiment about a slower copper take-up by China. The LME three-month copper contract closed up 1.5% at $6,088 per metric tonne on Tuesday, as severe Chilean flooding put a halt to production at several mines including Lundin Mining’s Candelaria mine, Barrick Gold’s Zaldivar and Codelco’s Salvador.

In an update on its own operations, the country’s state copper commission Cochilco said: “There is an effect, albeit of low significance, from operations temporarily halted (mostly Codelco’s Salvador and JX Nippon’s Caserones) due to the heavy rains.”

Elsewhere, physical coal prices have fallen to record low levels as Asian utilities and Australian exporters set a benchmark supply deal 17% lower on an annualised basis. Glencore and Japan's Tohoku Electric Power Company settled the price for the current financial year beginning 1 April at $67.80 per tonne, as have Tohoku and Rio Tinto.

The stated price is the lowest on record since 2008-09 settlements inked during the global financial crisis. News of the reduced pricing contracts also pulled the European spot markets down to the $56-58; a decline of over 70% since 2008.