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Bank Commentary
Investors drew breath after the recent rally in commodity markets. Industrial metals struggled to hold recent gains, while the energy sector fell sharply. Profit-taking across the sector was the predominate theme.

Crude oil prices were weaker as investors awaited evidence that global markets were rebalancing. A survey on Bloomberg showed the market’s expectations are for another strong rise in output from Libya and OPEC. All eyes will also be on this week’s EIA report, with another large drawdown in inventories expected.

Base metals were largely weaker, with all but nickel ending the day in the red. Nickel prices rose for an eighth straight session on the back of further supply-side news. The Indonesian Processing and Refining Association said that prices needed to rise another 10% before the Indonesian nickel smelters that were shut last year would restart. This was despite reports of more Indonesia export quota approvals. This follows on from reports that the Philippines is still considering forcing the closure of the mining industry due to environment concerns. Copper fluctuated before ending the day slightly lower as the stronger USD reduced investor appetite.

Iron ore prices held near their four-month highs, with futures markets in China remaining volatile. The apparent tightness in the spot market has seen bearish investor focus on longer dated contracts, with prices for September contracts falling nearly 1% on the Dalian Exchange. However steel futures in China remained strong, which should keep upward pressure on raw material prices in the short term.

Coking coal prices were stronger, with premium hard coking coal pushing above USD180/t for the first time since disruptions to Queensland exports pushed it above USD300/t. Suggestions of further rises in Chinese domestic coal prices kept buyer active in the seaborne market.

Gold was relatively unchanged as the stronger USD weighed on the investor demand. Prices had been well bid earlier in the trading day after data showed the US economy continues to grind higher amidst low inflation. However, selling emerged late in the day as investors took profits from this month’s 5% rally.