Commodities: Oil benchmarks recover after Saudi comments, gold retreats

Oil benchmarks were recovering from early lows in Asia at the start of the new trading week, following comments from Saudi Arabia that it was ready to up production if demand rises in emerging markets.

At 08:22 on Monday, the Brent month futures contract for August delivery was in positive territory trading at $63.64 per barrel up 62 cents or 0.98% but well below $65-plus price levels seen last week. Additionally, the WTI July contract was trading at $60.30, up 69 cents or 1.16%.

Following a reversion from recent price-levels late last week, the oil price came under fresh pressure over the weekend after Saudi oil minister Ali Al-Naimi said the country was ready to use its 1.5 to 2m barrels per day of spare oil production capacity, if demand, led by emerging markets, increased to a level that would absorb "additional barrels" over the second half of this year.

Away from oil markets, the rally in precious metals appears to be cooling off with gold falling back below the $1,200 an ounce level. COMEX gold for August delivery was trading down 0.39% or $4.70 to $1,197.20 an ounce while spot gold was down 0.29% or $3.50 to $1,196.77 an ounce.

Analysts at Barclays noted: “Gold has drawn limited safe haven interest in wake of the Greece debt crisis...Although there is scope for short covering, we believe the weak floor presented by the physical market will make it difficult for gold to sustain its gains in the absence of safe haven demand.”

Continuing with the market, COMEX silver for July delivery was down 0.27% or 4 cents at $16.07 an ounce, while spot platinum was down 0.74% or $8.07 to $1,076.68 an ounce.

Base metals endured reversals for much of last week on continuing concerns over Chinese demand and Greece’s debt woes. On the London Metals Exchange, three-month contracts of primary aluminium (down 0.4%), lead (down 0.8%), nickel (down 1%) and zinc (down 1.4%) traded lower. Copper appeared to be particularly hard hit, down 1.4% at $1,691.50 tonne, but a reversal in fortune could be on the cards, according to market commentators.

“Disappointing macroeconomic news weighed heavily on copper prices last week, after concerns over Greece and the risk to the second largest copper market, Europe, grew. Despite this, we believe, on a tactical level, conditions are increasingly constructive for prices. An easing in macro concerns should catalyze a price rebound,” said analysts at Barclays.

Finally, on the agricultural commodities front, CBOT corn (down 0.56%), ICE cocoa (down 0.91%) and cotton (down 0.10%) were trading lower, while CBOT wheat (up 0.76%) and CME live cattle (up 0.89%) were in the green.