Commodities: Oil markets retreat from previous highs, gold falls

Despite having to contend with a cacophony of news, oil markets began trading in Asia in the red. At 08:09 BST on Wednesday, the Brent front month futures contract was down 34 cents or 0.53% at $64.30 per barrel while the WTI was down 40 cents or 0.70% at $56.66.

Both benchmarks retreated from short-lived overnight highs following a flurry of geopolitical news. Markets spiked late on Tuesday on news that Iran had seized a US-flagged vessel. Sticking with the region, Saudi Arabia's King Salman named Khalid A. Al-Falih as chairman of Saudi Aramco, the world's biggest crude exporter, replacing oil minister and industry veteran Ali Al-Naimi, according to the country’s state television.

Al-Falih had been president and chief executive officer of Saudi Aramco. A replacement for the post has so far not been named, something which the markets will be closely monitoring. Another issue is whether oil minister Al-Naimi's position would be affected.

He has been oil minister since 1995, and played a pivotal role in Saudi Arabia's last decision not to support an OPEC production cut in order to support prices, which have fallen by 50% since June 2014.

Meanwhile, on Wednesday Al-Naimi said that demand for oil in Asia remains strong; as Chinese government data indicated the country’s imports had risen by 6.5% on an annualised basis in March.

Chinese demand came in at 10.58m barrels per day last month; the highest on government record books since September 2014. Nonetheless, oil markets largely stayed where they were on sentiment that there is more than adequate supply to meet current demand and more.

Switching to precious metals, gold prices eased in early trading as traders continued to focus on the conclusion of the US Federal Open Market Committee's two-day meeting later on Wednesday. Traders are hoping the US Federal Reserve could offer a possible indication about the timing of a highly-anticipated interest rate hike which would have massive implications for the direction of the price of gold.

COMEX Gold for June delivery was trading down 0.41% or $5.00 at $1208.90 per ounce. Spot prices in Asia were also lower with Dubai gold down 0.29% or $3.51 to $1208.66 an ounce. The COMEX silver front month contract was also marginally lower by 0.54% at $16.54 an ounce.

Chris Beauchamp, Senior Market Analyst, IG said: “Oil prices moved higher thanks to the Iran news, but were unable to hold their gains once the initial excitement was proved to be false.

“The Iran news gave gold and silver buyers the cue they needed to follow up on previous bounces with yet more buying, but even after the reports were said to be false the rationale remained. US dollar weakness on those consumer confidence numbers is playing its part, as the market looks towards the Fed.”

Meanwhile, copper markets continued to strengthen as the current sentiment in the market is that Chinese demand is picking up. The LME three-month copper contract closed up 0.1% or $5.50 at $6102.50 per tonne on Tuesday as the market continues to gain traction.

On the soft commodities front, corn markets are under pressure on oversupply concerns with world stocks projected at 188.46m metric tons (mt) versus 170.84m mt in 2013-14 and 135.43 mt in 2012-13.

CBOT corn contract was trading down 75 cents or 0.21% at $363.75 per bushel. Elsewhere, CBOT wheat and ICE Cocoa contracts were in the green, while ICE Cotton contract was trading down.