Commodity Wrap on September 1: Natural gas, crude oil gain; metals, bullion trading sideways

India's commodity markets saw sharp activity in the energy and agri pack on Wednesday. While natural gas, cotton, and crude oil futures were in high demand, metals were under selling pressure, with copper and zinc leading the laggards. Among precious metals, gold and silver were trading mixed.

On Tuesday, spot gold ended higher by 0.18 percent to close at $1813.4 per ounce. The US Federal Reserve’s announcement to keep the interest rates low without providing a timeline on withdrawing the economic support underpinned the precious metals on Tuesday, Prathamesh Mallya of Angel Broking said.

However, was last trading 0.29 percent lower at $1812 as investors awaited a key US jobs report for clues on when the Fed might start easing its monetary policy.

“Gold prices are expected to remain under pressure ahead of the key US economic data for hints on US Federal Reserve’s approach in the days ahead,” he said.

On MCX, however, gold and silver prices were mixed with yellow metal trading 0.06 percent higher at Rs 47,147 and silver down 0.18 percent at Rs 62,800.

The global crude oil prices were half a percent higher Wednesday, with US oil trading at $68.84 and Brent crude at $71.99. On MCX, crude oil was trading

Crude oil prices rallied after the OPEC+ made an upward revision to its 2022 oil demand forecast ahead of a meeting on Wednesday, sources told Reuters. The group faced pressure from the United States to raise output quickly to help support the global economy.

Two OPEC+ sources said the group's experts have revised its 2022 oil demand growth forecast to 4.2 million barrels per day (bpd), up from the previous forecast of 3.28 million bpd.

“Global investors are expected to remain cautious ahead of OPEC’s meeting on September 1, 2021. Also, mounting pandemic worries and low demand from the oil refineries in the Gulf of Mexico might continue to weigh on the market sentiments. Official US Energy Information Administration inventory data is also due later today,” Mallya said.

The dollar index showed roller coaster moves on Tuesday. It settled on a slightly weaker note at 92.655 with a loss of 0.06 percent. On Wednesday, the dollar index was trading marginally higher at 92.67.

The sharp decline in consumer confidence in the month of August in the United States pushed the dollar index lower on Tuesday, experts said.

Consumer confidence shrank amid concerns of delta variants of the coronavirus as the reading came at 113.8 against an expected reading of 122.9 and the July month reading was at 125.1.

“The dollar index is showing weakness since last week after the Federal Reserve Chairman’s remark for not raising interest rates soon. We expect the dollar index to remain volatile in today’s session ahead of the US ADP non-farm employment data and could hold its support level of 92.40,” Manoj Jain of Prithvi Finmart said.

The rupee quoted 0.28 percent higher at 73.126 against the dollar, having moved within a range of 72.947-73.150 earlier in the day.

Despite the gains, “rising crude oil prices and fear of the third wave of coronavirus could restrict gains of the rupee. We expect the rupee to remain steady and could face steep resistance around 73.0000 levels,” Jain added.

Nickel closed higher on London Metal Exchange (LME) Tuesday. The low level of Nickel inventories across exchanges amid increasing demand, primarily from the stainless-steel sector, underpinned Nickel prices. "The surge in demand for Stainless steel products following the resumption in global economies boosted appeal for Nickel," Mallya said.

"However, China’s move to limit stainless-steel production in order to sidestep any potential surplus and to comply with the power consumption norms might weigh on Nickel prices in the coming months," he added. On MCX, Nickel was trading 0.28 percent lower at Rs 1,442.

Aluminium prices continue to trade higher on LME (YTD gains on LME & MCX: 29 percent) as stringent environmental curbs take a severe hit at the smelter operating rates raising worries of a potential shortage. "Also, the continuation of the accommodative stance by the US Federal Reserve continued to weigh on the US Currency which also supported the Dollar priced industrial metals," Mallya said. However, on MCX, Aluminium was trading half a percent lower at Rs 211.

On Tuesday, LME Copper ended higher by 1.2 percent to close at $9,520 per tonne. Supply threats for Copper persist as a union at BHP's Cerro Colorado copper mine in Chile raised worries of a potential strike. On MCX though, copper was trading one percent lower at Rs 713.

“Supply worries from China and an accommodative stance by the US Federal Reserve might continue to support Industrial metals. However, slower than expected growth in China’s industrial sector is expected to pressure the entire pack,” Mallya said.

Agri commodities like cotton, mentha oil, and rubber were the top gainers on MCX on Wednesday, with each commodity rising marginally.

On NCDEX, cotton seel oilcake rose over 1 percent whereas chana and dhaniya slumped nearly 2 percent. Dhaniya also plunged 2 percent. Guar gum was down 5 percent and jeera was down half a percent.