Commodities: Oil, gold recover ground, coffee continues to slide

Oil benchmarks continued a tempered rise upwards; while gold climbed back above the $1200 an ounce level in Asian trading on Monday.

After enduring rocky sessions full of ups and downs over the past week, oil markets were relatively calmer. At 07:12 BST, the Brent front month contract was up 12 cents or 0.21% at $57.99 per barrel while WTI was up 18 cents or 0.35% at $51.82.

Meanwhile, the latest Baker-Hughes rig count data saw the number of operational US rigs dip to 988 on 10 April, down 843 from the same week last year. The Canadian count fell to 99, down 113, while the international count, excluding US and Canada, came in lower by 94 rigs at 1251.

Oversupply permutations continue to keep geopolitical risk weighting in check. Analysts at Barclays noted: “A bottoming out process for oil prices is likely to be tangible, in our view, only if the trajectory of demand improvement and supply adjustment holds firm momentum.”

“The momentum must not only clear the current market surplus, but also help draw down inventories built over 2014. This is not the case, however, as current supply/demand dynamics show a high degree of divergence, rather than a strong trend, and are not firmly moving in the direction to tighten market balances in over the second quarter of this year.”

Gold steadied above $1,200 an ounce on Monday after posting gains in the previous session. COMEX gold for June delivery was up 0.2% at $1,204.60 an ounce at 07:24 BST, while spot gold was broadly flat $1204.82 an ounce.

On a related note, first quarter volumes on the Dubai Gold and Commodities Exchange (DGCX) grew 11% from the fourth quarter of 2014. DGCX traded over 3.3 million contracts valued at over $97 billion, according to a data release.

LME Copper 3-month contract closed up $64.50 or 1.1% to end Friday trading at $6068.50 per tonne. Trouble in the iron ore markets continues as spot prices stayed below $50 per tonne in Asia on Monday. It has prompted UBS to cut its 2015-19 iron ore forecast by 20-30% to $48-55 per tonne and the long-term price by $20 per tonne to $55 per tonne.

Switching tack to soft commodities, coffee continues to lose ground as positive production in Brazil brightened the supply-side dynamic. Arabica coffee on ICE Futures US in New York fell 2.35% over the course of last week.

Net-bearish positions by traders in coffee came in at 4,613 futures and options in the week ended 7 April, according to the US CFTC data. Elsewhere, CBOT corn and wheat, as well as ICE Cocoa and cotton contracts are all trading in the red.