Commodities: Oversupply returns to hound oil markets, gold and cotton futures up

Oil trading commenced on a tepid note in Asia on Friday as oversupply concerns returned to hound the market.

Markets faltered overnight after the International Energy Agency (IEA) observed that a dip in US shale production was being compensated for by a rise in oil production elsewhere, with Saudi Arabia, Kuwait and United Arab Emirates (UAE) ramping up their output to the highest level since 1985.

OPEC collectively stated its production for April at 30.93m bpd, nearly a million above its agreed quota of 30m bpd. The cartel, where Saudi Arabia, Kuwait and UAE are leading members, is scheduled to meet on 5 June to discuss the stated quota.

At 08:02 BST, the Brent front-month futures contract was trading down 0.18% or 12 cents at $66.58 per barrel, while the WTI was down 0.25% or 12 cents at $66.58 per barrel. Rebound in precious metals market continued in tandem with further weakening of the dollar. Gold climbed to a three-month high on sentiment that the US Federal Reserve would put off increasing interest rates until the second half of 2015.

However, demand for the glittering metal remains a shade lacklustre, falling by 1% over the first quarter of 2015, according to the World Gold Council. According to the industry lobby group's data, total demand came in 1,079.3 tonnes for the three months to March 2015, compared with 1,090 tonnes recorded over the corresponding period the year last year.

Having soared overnight stateside, trading was more subdued on Friday with COMEX gold for June delivery fetching $1,220.70 an ounce down $4.50 or 0.37%. Spot gold came in at $1,219.64 an ounce down $1.50 or 0.12%. Elsewhere, COMEX silver was trading at $17.44 down three cents or 0.17%.

Alastair McCaig, market analyst at IG, said: “The squeeze on the US dollar has sent gold climbing higher but gold bugs would do well to keep calm. As impressive as this move has been up to the $1220 region, the precious metal still remains within a range it has been unable to break above since back in April.”

Dip in base metals prices continued as the end of the trading week nears. Zinc (down 1%), tin (0.8%), nickel (down 2%), lead (down 1.2%) and copper (broadly flat), marked a downbeat overnight close on the London Metal Exchange as Chinese macroeconomic data continued to paint a mixed picture on the strength of the country's economy.

On the agricultural commodities market, CBOT corn (up 0.48%) and wheat (up 0.15%) contracts, ICE cocoa (up 1.05%) and CME cattle (1.20%) futures were all in the green. However, the story overnight was all about cotton as the ICE contract (up 1.2%) came in at its highest in over a week, as overseas buyers queued up to buy US cotton with a weaker dollar making it less expensive for international textile manufacturers.

ICE cotton contract was trading within a range of 65.59 cents to 66.73 cents per pound on Friday; its highest front-month level since 6 May.