Commodities: Iron ore down, oil slips as traders take positions

There was a weak tone to commodities at the end of the week, especially in the energy space - albeit after several session of solid of gains - in the run-up to a weekend meeting of many of the world's major crude oil producers.

“Overall there’s a slight negative bias but this could be no more than a touch of position-squaring after this week’s rally and ahead of the weekend,” said David Morrison, senior market strategist at SpreadCo said in a note e-mailed to clients.

“Investors are well aware of Sunday’s meeting in Doha between OPEC and non-OPEC producers to discuss a freeze on crude output. Equity movements have a strong positive correlation to the oil price so we may see some profit-taking now given uncertainty ahead of the meeting.”

Front month West Texas Intermediate crude oil futures fell 2.75% on NYMEX to finish at $40.36 per barrel, alongside a 3.45% drop in natural gas futures to $1.90/MMbtu. That came despite another decline in the weekly Baker Hughes US oil rig count, which was lower by three to 351.

Heating oil futures on the other hand eked out a small gain, edging up by 0.28% to finish at $123.57 per gallon.

Industrial metals see profit-taking

Three-month LME-traded copper futures slipped 0.6% to $4,786.50 per metric tonne.

The most traded iron ore future on the Dalian Commodity Exchange ended the session down by 3.3% to $63 a tonne (408.50 yuan), after hitting a 17-month high in the previous session.

Spot iron ore was off by 2.2% to $58.60 a tonne. However, for the week it was still sporting an advance of about 10.0% - despite warnings from some industry insiders that recent gains would likely prove short-lived.

On a somewhat more positive note, on Thursday analysts at Sucden Financial said: "Moves on the upside, while limited by stockpiles at Chinese ports and local marginal producers, have a fair chance of building momentum. Therefore, it is possible that spot prices could well recover towards $58/tonne in the short term.

"[...] aside from some potential for tentative spikes towards $70, which in our opinion will be short-lived, we anticipate spot iron ore prices will be capped on the upside by ample supply and lower per capita consumption which could eventually drag prices lower towards the tail end of 2016."

Acting as a backdrop, gross domestic product in the People's Republic of China rose 6.7% year-on-year in the first three months of 2016, in line with analysts’ estimates, data released on Friday morning showed; but the reading also marked the slowest quarterly growth for the country since the height of the financial crisis in 2009.

Nonetheless, Julian Evans-Pritchard, China economist at Capital Economics told clients that: "A key reason to expect conditions to improve further is that credit growth remains strong. New lending jumped more than expected in March. As a result, our measure of broad credit growth has accelerated to a 20-month high. This is likely to feed through into stronger activity going forward."

In parallel, later in the day US Fed president Charles Evans would bring up the topic of a possible (convenient) overshoot of that central bank's inflation target.

On the Chicago Board of Trade, corn futures clocked in with a rise of 1.06% on the day to $382.0 per bushel.

Cotton#2 futures surrendered 1.36% to $60.02 per pound in ICE trading.

Gold wins reprieve

Bloomberg's commodity index lost 0.31% to 162.15 on Friday.

Gold futures won a reprieve from selling as the spot US dollar index drifted 0.22% lower for the day to 96.70.

The June 2016 COMEX-traded gold contract was up by 0.66% to $1,234.6 per ounce at the closing bell.