Commodities higher on weaker USD - ANZ

Research Team at ANZ, notes that the commodities were higher as the USD weakened and the outlook for steel-related commodities improved.

Key Quotes

“Crude oil prices rallied as yesterday’s pessimism about a production cut agreement turned to optimism as OPEC reiterated its goal to reach an agreement. Saudi Arabia had earlier suggested the group doesn’t necessarily need to cut production. However, Iraq’s Oil Minister Jabbar al-Luaibi said he’s “optimistic” a deal will be reached at OPEC’s summit in Vienna on Wednesday. Some OPEC members also travelled to Moscow to try to convince Russia to join the production cut agreement.”

“Industrial metals were stronger as the outlook for demand improved. China’s NDRC approved a RMB247bn railway plan to link Beijing to neighbouring cities. Zinc led the gains as the commodity (which is already in deficit) is seen to benefit the most from such an infrastructure plan. The new railway plan also helped boost sentiment in the steel and iron ore markets. Iron ore was also supported by a fall in port inventories in China.”

“A weaker USD and increasing political risks in Europe saw investors return to gold. Italian Prime Minister Renzi faces a key referendum this weekend which could bring further upheaval to the country. Weaker equity markets in the US also boosted gold’s appeal.”

“Agriculture markets were mixed. Grains were broadly higher, led by gains in soybeans. In softs, sugar rose on the back of tight supply in China.”