Commodities: Oil price rises on Chinese manufacturing data, gold up on Fed caution

Oil benchmarks were trading higher on Thursday, following a marginal improvement in Chinese manufacturing.

The HSBC China manufacturing purchasing managers’ index (PMI) released overnight rose from 48.9 to 49.1 in this month, showing that the rate of decline - measured by any figure below 50 - had slowed, though it still missed the consensus forecast of 49.3.

The slight uptick helped Brent and WTI extend overnight gains achieved stateside, after US Energy Information Administration (EIA) data indicated that the country’s commercial crude oil inventories dipped by 2.7 million barrels in the week ended 15 May.

At 09:08 BST, the Brent front-month futures contract was trading at $65.29 per barrel, up 26 cents or 0.40%, while the WTI was up 28 cents or 0.47%. Nonetheless, market commentators believe the oil markets will continue to face testing times with supply side fundamentals not materially altering.

Analysts at Barclays Capital noted that in the near-term, oil prices appear to have outpaced the improvement in underlying fundamentals and technicals pointed to a short-term reversal.

Additionally, analysts at IG said that with near all-time high levels of crude awaiting release onto the markets, alongside a whole raft of producers waiting to bring their operations back on board, further downside in the price of oil appears to be on the cards over the coming weeks.

On the precious metals front, gold appeared to be firming up above the $1,200 an ounce level after US Federal Reserve minutes of the central bank’s April monetary policy meeting suggested that decision makers believed raising interest rates in June would be a hasty.

The Fed appeared to be concerned about soft US economic data including a weaker labour market. COMEX gold extended its stay in the green patch coming in at $1,211 an ounce, up $2.30 or 0.19%. Spot gold traded at $1,210.45 an ounce up 65 cents or 0.05%. Additionally, COMEX silver traded at $17.23 up 0.11 cents or 0.65%.

Marginal improvement in Chinese data was not enough to trigger broader gains in the base metals market with lead (down 1%), nickel (down 1.5%) and zinc (down 1.4%) all closing in the red on the London Metal Exchange overnight, but copper (up 0.1%) and tin (up 0.2%) posted minor gains.

The agricultural commodities market remained mixed on demand and dollar valuation permutations. CBOT corn (up 0.83%), wheat (up 0.93%) contracts were trading in the green along with ICE cotton (up 0.59%). However, ICE cocoa and CME live cattle contracts were down 0.64% and 0.58% respectively.