Commodities: Oil retreats from overnight spikes, gold falls back

Both oil benchmarks retreated from overnight gains while gold also went into reverse in Asian trading on Thursday.

US stockpile data heavily influenced trading in the WTI front month contract stateside, as inventories declined by 3.9 million barrels in the week to 1 May, versus market expectations for an increase of 1.5 million barrels. It caused the preferred US benchmark to rise by nearly 3% in New York's intraday trading to well above $61 per barrel.

However, the spike proved to be short-lived as despite the decline, total US stockpiles were still at their highest level on record for this time of year at 487.0 million barrels of crude. At 08:04 BST, the WTI was $60.81 per barrel down 12 cents or 0.20%. Additionally, Brent – the global proxy benchmark – also retreated to $67.58, down 19 cents or 0.28% on Thursday’s opening level, having traded above $68 for much of Wednesday.

Josh Mahony, analyst at IG, said: “An unexpected fall in US oil inventories saw WTI extend the gains which have seen it regain almost $20 since the March low of $42. Continued build up of oil in the US has been threatening to derail this recent rally and the news that this has begun to fall shows that the depressed prices of late have finally made an impact upon suppliers in the US.”

“This will be music to the ears of those at OPEC whose goal it is to price US producers out of the market. However, with the largest ever US stockpile still in place, the threat of another crash remains.”

Switching to precious metals, the recovery in gold prices got reversed on sentiments of higher US real yields counteracting the effects of a relatively weaker dollar and persistent speculation on when the Federal Reserve will raise interest rates in June.

COMEX gold was trading at $1,182.10 an ounce down $8.20 or 0.69% while spot gold was fetching $1,184.11 an ounce, down $8.13 or 0.68%. Additionally, COMEX silver was trading down 0.91% or 15 cents at $16.36 an ounce.

Base metals also retreated from spikes earlier in the week as investors sought to temper market sentiment in line with supply-demand fundamentals as slower economic data from China returned into play. Copper, currently trading at year highs, retreated overnight to $6404 per tonne, down 0.5% or $31 on the London Metal Exchange. LME three-month nickel and zinc contracts also fell by 1.6% and 0.7% respectively.

On the soft commodities front, ICE cocoa contract for July delivery retreated from overnight gains, caused by supply concerns from Ghana, trading down 0.82% or $24 at $2,919 per tonne. ICE cotton and CBOT corn contracts were in the red, while CBOT wheat was marginally in the green.