Commodities: Analyst chatter send iron ore diving, Citi expects rally in oil

Commodities dropped as traders made their way back to the City following the Easter break, with analysts focused on the prospect for lower Chinese steel demand going forward.

On that note, Macquarie issued a downbeat report on the outlook for industrial production worldwide, telling clients it expected momentum to fade over the next few months, "before rolling over during the summer" and with Chinese construction playing a key role

In parallel, analysts at Citi sounded a 'bullish' note on commodities, albeit with exceptions, namely bulk commodities and precious metals.

Such talk from analysts saw the price of iron ore slide again in overnight trading, with 62% Fe Tianjin iron ore closing at $66.5 a tonne, down from $61.2 a tonne.

Chinese steel rebar futures also retreated, from $522.4 a metric tonne to $512.7 a tonne.

Citi was however positive on base metals, despite which July 2017 copper futures on COMEX were down by 2.68% to $2.54 a pound.

As of18:41 GMT Bloomberg's commodity index was down by 0.91% at 85.26 even as the US dollar spot index retreated 0.54% to 99.75.

Gold futures on the other hand recovered from early weakness to trade up by 0.12% to $1,293.50/oz., although silver and spot platinum were still near their worst levels of the day.

A retreat in Brent crude oil futures was attributed by some to the US Department of Energy's monthly Drilling Productivity report, which showed oil production from the major US shale plays was seen rising to 5.2m barrels a day next month.

Front month Brent crude was losing 0.62% to $55.02 per barrel on the ICE, while NYMEX naytural gas was off 0.6% to $3.14/MMBtu.

However, here too Citi had a constructive view, saying it expected futures to rally into the mid-$60 barrel range by end-2017, as inventories beging to decline despite rising US shale oil output.

To take note of, the day before Saudi energy minister Khalid Al-Falih said oil producing nations were showing "very good" compliance with their commitments to reduce output.

There was also a spot of softness in soft commodities, with July 2017 CBOT corn futures off 1.54% at $3.6750/oz. and similarly-dated cocoa down 0.57% to $1,916 a metric tonne.