Oil and gold prices fell on Monday while base metals consolidated as trading in commodity markets started the week in cautious mode with risk appetite remaining subdued ahead of a busy week for economic data.
This week’s purchasing managers surveys (PMIs) for manufacturing, due out later in the session, and the service sector, due on Wednesday, will provide the first indications of whether economic activity managed to stabilise in January or if there was further weakness in measures for orders, output and employment.
The UK January manufacturing PMI was the third weakest since the survey began in 1992, with new orders, export orders and backlogs of work continuing to contract substantially while manufacturing employment fell at a record rate.
“The UK manufacturing sector is being battered by depressed domestic demand, very weak activity in key export markets, tight credit conditions and intense competition,” said Howard Archer, chief European economist at IHS Global Insight: “While the substantially weaker pound is helping UK manufacturers, this is being more than offset by sharply deteriorating domestic demand in key export markets, notably the Eurozone and the US.”
In energy markets, ICE March Brent fell $1.10 to $44.80 a barrel, moving in a range between a low of $44.40 and a high of $46.56.
Nymex March West Texas Intermediate fell $1.28 to $40.40 a barrel.
High stocks at Cushing, Oklahoma, the delivery point for WTI have led to a massive spread – more than $4 a barrel – between Brent, the European benchmark, and WTI, the US benchmark.
The rise in Cushing inventories also widened “time spreads” – the price difference for immediate delivery and forwards contracts – along the WTI futures curve.
Nymex April WTI traded $1.23 cents lower at $43.90 a barrel with the time spread between March and April at $3.50 a barrel.
Gold slipped 1.6 per cent to $912 a troy ounce, moving between a low of $903.80 and a high of $926.95, after ending trading in New York on Friday at $926.75.
Although investor interest in gold remains very strong with holdings in gold exchange traded funds at record levels, there is evidence that volatile prices are affecting jewellery demand. Abu Dhabi said that gold jewellery sales dropped 70 per cent in January while demand for gold bars was down 50 per cent.
Among the base metals, copper rose 0.4 per cent at $3,226 a tonne while aluminium added 0.3 per cent at $1,357.25 a tonne.
Base metals trading in Shanghai resumed after a week-long holiday break.
Dealers in Shanghai said market players were concerned that weak demand meant there was no shortage of metal, reflected in high stocks levels at London Metal Exchange warehouses.
