Commodities: Mostly higher but moves were muted - ANZ

Commodities were mostly higher in the previous session, although the moves were muted, explains the analysis team at ANZ.

Key Quotes

“While the USD helped provide some support to commodity markets, investors remain cautious after the focus turned back to the outlook for global central bank policy.”

“Oil prices showed some tentative signs of recovery after a torrid week where a persistent surplus in the US weighed on sentiment. Although inventories of crude oil fell 1.2 million barrels, they remain more than 100 million barrels above the five-year average. The market also brushed aside signs of rising OPEC production. The Libyan National Oil Co said its output will reached 900kb/d within days. The week ended with further signs that reducing the glut of oil will be challenging. According to Barker Hughes, the US oil rig count rose 6 to 747 last week, the 22nd consecutive week of increases.”

“Base metals were broadly higher, with zinc leading the gains. The International Lead and Zinc Study Group (ILZSG) said the zinc market was in 92,400 tonne deficit in April. This followed on from data showing Chinese zinc production continues to fall. According to NBS data, China’s refined zinc production fell 9.9% y/y to 481kt in May. Year to date production (Jan-May) is now down 1.7% y/y. As a consequence, inventories held on exchanges are now at their lowest level since 2009.”

“Iron ore prices also inched higher after positive economic data boosted sentiment in the steel and iron ore markets. Futures markets in China were also strong, as a rise in consumer sentiment and manufacturing activity helped ease investors’ concerns about future demand. Spot iron ore were further supported by data showing port inventories in China fell. SteelHome data showed stockpiles fell 0.8% to 139mt.”

“Cooking coal prices came under further downward pressure as sellers become increasingly desperate to offload unwanted cargoes. This helped push premium hard coking coal fell below USD140/t for the first time since the supply disruptions in Queensland earlier this year.”

“Gold prices held steady, with investors still cautious after the Fed raised rates by another 25bps last week. While a weaker USD helped increase investor appetite, this was somewhat negated by data showing signs of strength in the US jobs market. However investors holding physical gold in ETF continued to pull out. SPDR Gold Trust holdings have fallen 1.5% since the Fed raised rates on Wednesday.”