Commodity wrap: oil slips on oversupply worries as gold and base metals surge

Oil prices fell sharply on Wednesday due to oversupply concerns and rising inventories in the US.

Meanwhile, gold and silver were higher ahead of the release of key US economic data.

Base metal prices were also higher ahead of key economic indicators from the US, which is likely to pave the way for the Federal Reserve’s monetary policy decision next month.

Oil falls

Higher crude inventories in the US led to a drop in oil prices on Wednesday, intensifying worries about oversupply.

Citing American Petroleum Institute figures, market sources reported late on Tuesday that US crude stocks saw an increase of 4.45 million barrels in the week concluding on November 14.

During the same period, gasoline inventories grew by 1.55 million barrels, and distillate inventories also rose by 577,000 barrels.

Traders are now waiting to hear if they get confirmation of the build from this afternoon’s official inventory data from the US Energy Information Administration.

For the past three weeks, oil prices have remained relatively stable, with the front-month West Texas Intermediate (WTI) contract trading in a narrow band.

The WTI price has primarily hovered around $60, facing resistance near $61 and finding support near $59.

“This is an indication of the indecision surrounding the oil market currently,” said David Morrison, senior market analyst at Trade Nation.

US sanctions are projected to reduce Russia's oil export volumes, according to a Monday statement by the US Treasury.

The sanctions are already impacting Russia's oil revenue, prompting crude buyers in India and China to seek oil from other suppliers.

However, this concern about Russian supply is balanced by analyst predictions that oil production is surpassing current demand, which has driven prices down.

At the time of writing, the WTI crude price was at $59.03 per barrel, down 2.7%, while Brent was at $63.18 a barrel, down 2.6% from the previous close.

Gold climbs

Investors sought safe-haven assets, driving gold up over 1% on Wednesday.

Attention is now focused on the Federal Reserve's minutes from its latest meeting and a delayed US jobs report, both due on Thursday, for signals about future interest rate changes.

Investors are currently focused on two key upcoming releases: the minutes from the Federal Reserve's October meeting and the September jobs report, which was postponed due to the US federal government shutdown.

The recent increase in Americans receiving unemployment benefits, reaching a two-month high in mid-October, comes as market attention focuses on the Federal Reserve.

The minutes from the Fed's latest meeting are anticipated to reveal the extent of the disagreements among policymakers regarding the appropriate response to inflation and the evolving labor market.

Meanwhile, traders have become less certain about a rate cut next month, with the probability, as tracked by the CME FedWatch tool, falling to just over 46% from 63% last week.

“It is still worth noting that the daily MACD (gold) has flattened out since Thursday last week, suggesting a slowing in upside momentum,” Morrison said.

At the time of writing, the COMEX gold contract was at $4,113.66 per ounce, up 1.2%, while silver was at $51.755 per ounce, up 2.4% from the previous close.

Base metals

Base metals markets saw a quiet start to Wednesday.

Most contracts edged marginally higher on light trading volume as market participants adjusted their positions in anticipation of tonight's key NVIDIA earnings report and crucial US economic data expected on Thursday.

Zinc is still a focus in the physical market, with China increasing exports due to a rare global supply shortage.

Chinese smelters exported around 10,000 tons in October, capitalising on high international prices while domestic demand remained flat.

Exports are projected to increase, with a combined volume of 50,000 tons expected for November and December, according to Neil Welsh, head of metals at FCA-regulated multi-asset brokerage Britannia Global Markets.

Despite the recent easing of disruptions at Indonesia's Grasberg mine, following Freeport's partial resumption of operations, wider concerns about physical supply continue.

Copper prices, however, recovered and were trading higher at the time of trading.

The three-month copper contract was at $10,815 per ton, up 1.1%, while the zinc contract was at $3,002.25 per ton, up 0.4% from the previous close.