Commodities: Mixed amid political uncertainty and a weaker USD - ANZ

Commodities were mixed amid a backdrop of continuing political uncertainty and a weaker USD in the previous session, explains the analysis team at ANZ.

Key Quotes

 “Crude oil prices rose as the focus returned to a potential drawdown in US oil inventories. While Saudi Arabia has intimated that global inventories are falling, investors are expecting the next EIA weekly report to show US crude oil stockpiles have fallen 2.45 million barrels. Prices had been under pressure earlier in the day after a report from OPEC showed that its production had increased by 336kb/d due to a rise from Libya and Nigeria.”

“Base metals were mixed, with the minor metals pushing higher, while concerns over Chinese demand limiting other metals. Zinc fell sharply after falls in steel futures in China drive fears of weaker demand in steel in China. Copper held steady after data showed inventories on the LME fell 1.3% to 275kt, while SHFE copper inventories also fell. The weakness in steel markets also pushed iron ore spot prices lower.

The weakness in steel prices was driven by a new directive from the NDRC that there would be no approval of new entities that are investing in vehicles powered by fossil fuels.”

“Coking coal prices were unchanged, after reports that major Japanese steel producers Nippon Steel and Sumitomo Metal Corp that it would move to indexlinked prices for quarterly premium coking coal contracts.”

“Gold prices held steady as the US Federal Reserve met to discuss whether to increase the fed funds rate. With the market pricing a 98% probability of a 25bps increase, the market will be focused on the outlook for interest rates during the remainder of the year.”