Commodities: Subdued performance - ANZ

According to the analysts at ANZ, commodities were generally subdued in the previous session as the market waited for Trump’s policy speech to Congress.

Key Quotes

“Crude oil prices were relatively unchanged, unable to break out of the increasingly tight range they have been trading in for the past month. The Chicago Board Options Exchange (CBOE) crude oil volatility index is at its lowest level since 2014. EIA data released today showed a pickup in the inventory build in the US. Stocks rose by a lower-than-expected 1.5 million barrels to 520.2 million barrels which helped support prices. Refineries also boosted the amount of crude they processed, while gasoline inventories fall 546,000 barrels. This suggests we are seeing an expected pick up in seasonal demand.”

“Base metals were stronger after data showed the Chinese manufacturing sector was growing strongly. China’s PMI for February rose to a higher than expected 51.6. Trump’s reiteration of his infrastructure spending program in the US also helped support prices. Aluminium was one of the better performers after China announced it would cut aluminium output in some northern cities to curb air pollution. Freeport said it would restart some operations at its Grasberg copper mine to supply a domestic smelter. However, it still remains at loggerheads with the Indonesian government over new mining and export licencing requirements.”

“Gold prices struggled to hold ground as the market increasingly prices in a rate hike in the US. Odds that the Fed will increase rates this month have jumped to 80%, up from 52% on Tuesday. This rise in expectations has been driven by more hawkish Fed speakers in recent days, while economic data has continued to show an improvement in the economy.”

“Iron ore spot prices were relatively unchanged. However, futures markets in China are pushing higher after the positive factory data in China and should lead to some stronger buying in the physical market today.”

“Agriculture markets were also higher, led by gains in grains markets. Wheat prices surged higher after Egypt extended one of its biggest purchasing sprees in its history. Sugar was also strong, as weather conditions in India, China and Brazil threaten to weaken crops.”