Oil prices eased on Tuesday, but held close to three-week highs on rising Middle East tensions and as China showed some signs of economic recovery.
A cargo vessel’s crew was forced to abandon ship on Sunday following missile attacks by Iran-aligned Houthis rebels, the first such evacuation since the militant group’s strikes began in the Red Sea. Crude markets were “marginally lower” in “quiet trading over the Presidents’ Day holiday in the U.S. and as demand concerns offset ongoing Middle Eastern geopolitical tensions”, Reuters reported, citing IG market analyst Tony Sycamore.
The European Union on Monday launched a defensive naval operation, commanded by Greece, aimed at protecting ships navigating in the Red Sea. On the precious metals front, gold prices were buoyed by safe-haven demand, which kept the metal supported above the $2,000 an ounce mark, while markets also awaited more clarity on the outlook for US interest rates.
JPM Commodities Research in a recent note said, commodities have historically generated positive returns going into the first Fed cut and after. By sector, energy and precious metals have displayed the strongest gains following initial Fed cuts. “The current set-up is reminiscent of the soft landing 1995 cycle when commodities surged 20% in the aftermath.” Spot gold (XAUUSD:CUR) was trading +0.43% higher at $2,026.27 an ounce by 6 am ET, while silver, palladium, platinum also inched higher.
On the base metals front, copper prices changed course to trade higher as the U.S. dollar index (DXY) dipped and some positive sentiment in the Chinese market. China also made a record cut to a benchmark reference rate for mortgages on Tuesday, in a bid to shore up its beleaguered property market and economy. ANZ said copper is also expected to benefit from the energy transition, with investment in renewable energy infrastructure in particular boosting demand enough to offset weakness in traditional manufacturing/industrial sectors.
Elsewhere, among agriculture commodities, soybean and cocoa prices fell, while wheat rose. As per ING, recent data from the Indian Sugar & Bio-energy Manufacturers Association shows that 2023/24 sugar production in India fell 2.5% year-on-year to 22.4mt (excluding sugar diverted for ethanol production) through until 15 February, compared to 23mt during the same period last year. The group further said that 505 mills were crushing cane by mid-February compared to 502 mills at the same time last year.
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