Copper Price Halts Decline, Oil Price Rally Gives Rise to Caution

Copper Price Halts Decline, Oil Price Rally Gives Rise to Caution 

Oil prices rallied on a second day on the back of a mild retreat in the USD and a surprised draw in U.S. inventories. Crude inventories fell by 4.9 million barrels last week, according to data from the Energy Information Administration on Wednesday. Brent oil jumped above $40 per barrel in early trading and has remained there. However there has been no change in physical supply and demand fundamentals and a global oversupply might render the rally short-lived.

Copper prices traded steady after hitting a one-month low of 2.1305 earlier this week. The Fed’s meeting minutes led to moderate weakness in the USD, which in turn underpinned metals prices. Shanghai Futures Exchange copper was steady at 36,700 yuan ($5,668) a tonne. Other risk assets like equities also posted gains today after several days of losses. In Europe, an expected rise in German economic growth in the first quarter may support metals demand.

Gold prices also traded sideways after the release of the U.S. Federal Reserve March meeting minutes. The minutes revealed that several FOMC’s members called for a cautious approach to raising rates given external (global) growth risks. This resulted in a weaker USD which propped up prices of dollar-denominated commodities. However gold prices are weighed by the prospects of a rate hike at the June meeting as “some participants indicated that an increase in the target range at the Committee’s next meeting might well be warranted”, provided incoming economic data remained consistent with their expectations.