Commodities: Oil recovers ground, gold remains in the green

At 16:05 BST, the Brent front month futures contract was trading at $64.85 per barrel up 83 cents or 1.30%, while the WTI was up 0.98% or 57 cents at $58.56.

The dollar has risen against the euro for much of the current week after a European Central Bank official said it would boost its asset purchase stimulus program in May and June to offset a potential market slowdown.

The US Department of Energy also reported crude oil stockpiles at record highs, despite pointing to a weekly decline for last week. Joshua Mahony, market analyst at IG, said: “A third consecutive weekly fall in US oil inventories hardly lit a flame to oil prices as a muted and short-lived bounce higher points to the fact that despite reserves falling another 2.2m barrels, there are still over 60m barrels in Cushing, Oklahoma stocks.

“With near all-time high levels of crude awaiting release onto the markets, alongside a whole raft of producers waiting to bring their operations back on board, I can only seen further downside in the price of oil in the coming weeks.”

Meanwhile, gold continues to hold ground above $1200 an ounce, even if its five-day rally fizzled out overnight. In the US, COMEX gold for June delivery came in at $1,211.20 an ounce, up $4.50 or 0.37%. A spot ounce of gold was fetching $1,210.18 up $2.32 or 0.19%. Concurrently, silver was also in the green at $17.21 an ounce up 13 cents or 0.78%.

Elsewhere, iron ore markets remain in a wretched patch with Fitch Ratings further downgrading its price assumptions for ratings purposes. In a note to clients, the agency said iron ore prices would “stay low for several years due to increasing supply, weak demand growth in China and the slower-than-expected closure of high-cost mines”.

As a result, Fitch has revised its iron ore spot price assumptions on a cost and freight basis down to $50 per tonne in 2015 and 2016, compared to $65 and $75 previously. More significantly, its long-term price assumption was also lowered $70 from $80.

Fitch observed: “We expect iron ore market leaders BHP Billiton, Rio Tinto and Vale to continue increasing production in 2015 despite falling prices, as they are also the lowest-cost producers. This is likely to outweigh the impact of any shutdowns among higher-cost producers in the near-term.”

On the agricultural commodities front, a whole raft of contracts were trading lower. CBOT corn (down 0.69%) and wheat (down 0.10%) contracts, CME live cattle (down 0.56%), ICE cocoa (down 0.95%) and cotton (0.90%) were all in the red.