Commodities: Oil recovers in European trading, dollar weighing on metals market

Oil benchmarks recovered from overnight lows on Wednesday staging a rebound in Europe, as a stronger dollar weighed on the wider commodities market.

At 08:35 BST, the Brent front month futures contract was trading up 50 cents or 0.78% at $64.22 per barrel while the WTI was up 67 cents or 1.15% at $58.70. The market reversed some of the losses as the prospect of additional Iranian barrels adding to the supply glut fanned bearish sentiments on Tuesday.

Traders would be looking to take their cue from US crude oil inventory data for the week ended 22 May, due out later on in the session. At last filing, stockpiles stood at 482.2 million barrels; the highest level since 1930, according to the US Energy Information Administration. City analysts are expecting a decline in the region of 1.5-1.7 million but many predict uncertain times ahead.

Chris Beauchamp, senior market analyst, IG, said, “It was the dollar move, more than anything else, that hit oil prices, but news that the Iranians plan a production bonanza did not help matters. Oil continues to look highly vulnerable in coming weeks, even as the US driving season gets underway.”

Meanwhile, gold just about managed to hold off a two-week trough early on Wednesday after shedding nearly 2% stateside on the end of Indian seasonal buying and suggestions that US Federal Reserve may be on course to raise interest rates this year.

COMEX gold for August delivery was trading at $1,189 an ounce, coming in broadly flat just above its weakest level since 12 May of $1,185. Spot gold also bounced back trading at $1,188.17 an ounce, up 87 cents or 0.07%. COMEX silver was flat at $16.75 an ounce.

Meanwhile, the base metals market continued to see red with trading on the London Metal Exchange ending sharply lower overnight. Copper touched its weakest level since 29 April falling to $6,105, before edging up to $6,127 closing down 0.8%.

The three-month forward contracts for lead (down 1.2%), nickel (down 1.1%), tin (down 1.8%) and zinc (down 0.2%) marked a torrid day for the market.

A stronger dollar weighed on the agricultural commodities market as well, with only the ICE cotton contract (up 0.10%) bucking the trend on Wednesday. CBOT corn (down 0.05%) and wheat (down 0.46%) contracts, ICE cocoa (down 0.10%) and CME live cattle (down 0.05%) were all trading lower.