Commodities: Citi sounds positive note, but expects short-term weakness in oil
The energy space was in sharp focus on Monday after oil producers failed to reach an agreement to freeze production over the weekend, initially sending oil futures hurtling 6% lower.
Nonetheless, analysts were generally upbeat on the outlook for crude prices going forward and news of disruptions to supplies from Kuwait saw futures saw benchmark crude futures recover.
Citi's global commodities research team, led by Ed Morse, told clients that: "Commodity markets are stumbling to normalcy. [...] Energy is uniquely critical to a commodities rebound, given the energy intensity across commodities, Oil markets now look likely to enter a period of sustained inventory draws, ushering in higher prices, propelled by demand growth and declining non-OPEC production."
However, "but energy and therefore all commodity prices can be capped by a return to drilling in unconventional resources," he added.
In the most extreme short-term, Morse told Bloomberg TV he expected the weekend's disruptions to Kuwaiti supplies to be short-lived and the oil complex to come under renewed selling pressure again.
As of 19:27 BST, front month Brent crude futures were 0.89% lower to $42.73 per barrel on the ICE, alongside a drop of 2.1% in West Texas Intermediate to $39.55 per barrel.
Natural gas futures were heading the other way, gaining 2.0% to $1.94/MMbtu.
Industrial metals were well bid, with three-month LME-traded copper futures endind the day higher by 0.9% at $4,822.50 per metric tonne. Zinc futures rose 1.7% to $1,901.00/mt and nickel was standing 2.3% higher at $9,062.50/mt.
To take note of, ahead of the latest IMF meetings over the weekend, China announced it would remove export subsidies on aluminium products including speciality steel and titanium.
Nonetheless, for analysts at Macquarie that was more of a strategically-timed message meant to forestall US rhetoric.
Gold futures were little changed despite the gyrations seen in the price of oil, but silver lost some of its lustre, slipping 0.45% to $16.24/oz. on COMEX.
Soft commodities were the strongest corner of the market, with the July 2015 corn contract up by 0.65% on the Chicago Board of Trade as of 19:33 BST. Similarly-dated CBoT wheat futures jumped 2.89% to $481.00 per bushel.
Cotton#2 furures on ICE did even better, rising by 3.52% to $62.13/lb.
June 2016 live cattle futures on the CME fell by 2.46% to $119.18/lb.
Bloomberg's commodity index was up by 0.35% at 162.72, while the US dollar spot index drifted 0.23% lower to 94.475.