Commodities: Gains in oil futures cut short, natural gas plummets

As of 1822 GMT, the Bloomberg Commodity index was off by 1.55% to 86.16 as the US dollar spot index tacked on 0.30% to 103.09, although the US currency was off its best levels of the day, having hitting an intra-session high earlier in the day at 103.79.

Dollar gains came on the back of a stronger-than-expected reading on the ISM manufacturing sector purchasing managers' index for the month of December.

Prompt-month West Texas Intermediate futures were down 2.40% at $52.43 per barrel, down from their session highs of $55.24.

Natural gas futures were especially weak, with the February 2017 NYMEX contract down 10.55% to $3.33/MMBtu.

"There has been a swift turnaround in markets this afternoon as the US dollar fell away from the key levels on the upside, which saw EURUSD make new lows, and GBPUSD both bounce off a key downside level. The catalyst for the downside seems to have come from the oil price as the rally in WTI dramatically ran out of steam, sending prices over $2 lower to trade below $53 per barrel. It had been a positive session across the board as US markets opened up this afternoon but the turnaround has dragged all asset classes away from their highs and in most cases well into negative territory," said James Hughes, chief market analyst at GKFX.com.

Oil futures had moved higher throughout the day on the back of better-than-expected Chinese factory sector data released overnight and on the back of local media reports citing officials from Kuwait and Oman saying their two countries had begun to cut output, making good on their pledges to rein in production.

Kuwait Oil Co. boss Jamal Jaafer told Al-Anba that it had decreased production by approximately 130,000 barrels a day. In parallel, Omani authorities said they were curbing output by 45,000 b/d.

To take note of, what traders had already returned to their desks following the Christmas break were waiting on the latest weekly API inventory data due out later in the session.

Despite the latest set of upbeat figures out of China, most bulk metal prices drifted lower in overnight trading, with Chinese steel rebar futures slipping from $480.9/metric tonne to $478.8 a tonne.

Spot iron prices at Tianjin finished the Chinese session down at $72 a tonne versus $75.3 on the day before.

Strikingly, gold futures began the new year on a solid footing and were trading near their session highs of $1,162.30, up by 0.92% from where they had begun the day.

Agricultural commodities were also mostly higher, with March 2017 ICE futures particularly well bid and gaining 2.02% to $2,169 per metric tonne.