Commodity Roundup: Gold extends gains; Chesapeake output cut plans push natgas higher

February 21, 2024

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Oil pump, oil industry equipment — wenbin/Moment via Getty Images

Gold ticked up Wednesday, set to extend gains to a sixth consecutive session despite a stronger dollar, while prices moved in a narrow range as markets awaited FOMC Minutes for insight into when the central bank may start cutting interest rates. Spot gold (XAUUSD:CUR) was up +0.32% to $2,030.05 an ounce by 6 am ET.

However, market participants have scaled back expectations for early and steep interest rate cuts and now anticipate June to be the starting point of the easing cycle. Silver prices also rose, tracking moves in bullion, while platinum and palladium eased.

In the energy complex, oil prices inched lower as worries about global demand countered support from the soaring Israel-Hamas conflict. While persistent fears over escalating tensions in the Middle East has kept oil prices volatile, albeit in a tight range, investors appear more worried about flagging global demand, compared to the conflict in the Middle East, one of the world’s major oil-producing regions. CME Group noted that, even if China succeeds in boosting growth in 2024, commodity prices might not sustain a rally unless global conflicts intensify supply disruptions.

On the supply front, Russia, which has pledged output cuts of 500,000 barrels per day (bpd) as part of a package of cuts with Organisation of Petroleum Exporting Countries and its allies (OPEC+), said on Tuesday that it intends to fulfil its OPEC+ quota in February despite a decline in oil refining. Meanwhile, US natural gas prices jumped as major shale driller Chesapeake Energy (NASDAQ:CHK) announced production cuts for the year.

In metals, aluminium surged on speculation the White House is planning fresh sanctions on Russia, ING reported. LME aluminium rose over 2.5% in morning trade today following reports of plans for a new wave of US sanctions against Russia; copper (HG1:COM) futures were little changed on the day. Hopes of a strong demand outlook in top metals consumer China following Beijing’s efforts to boost its economy and property sector has helped boost market sentiment to some extent.

Analysts at Goldman Sachs said, copper and gold are expected to see the largest immediate price boost in the commodities sector from potential U.S. Federal Reserve interest rate cuts. “The immediate price boost from a Fed driven 100 basis point decline in U.S. 2-year rates is the largest for metals, especially copper (6%), and then gold (3%), followed by oil (3%),” Goldman Sachs said in a note dated Feb. 20, Reuters reported.

Elsewhere, among agriculture commodities, soybeans and wheat futures fell, while cocoa gained.