NEW YORK, July 2 Buoyant energy and grain
markets pushed commodities higher on Tuesday, with oil jumping
to nine-month highs above $99 a barrel as turmoil in the Middle
East unsettled investors.
Gold and copper ended their two-day winning
streak, and both fell almost 1 percent as the dollar
strengthened and recent short-covering ran out of steam.
Most crop markets rose as investors scooped up bargains
after the selloff following the bearish crop report last week.
In tepid trading ahead of the U.S. Independence Day holiday
on Thursday, the 19-commodity Thomson Reuters-Jefferies CRB
index rose 0.64 percent for its second-largest daily
gain in a month.
The U.S. dollar rose to a near five-week peak against a
basket of currencies on expectations Friday's U.S. jobs
data will bolster the chances that the U.S. central bank will
scale back its stimulus measures sooner than expected.
A strong reading would lift both U.S. Treasury yields and
the dollar, and in turn weigh on gold. Lower volume could
translate into increased volatility.
"If numbers are better than expected, selling momentum could
kick in again," MKS Capital senior vice president Bernard Sin
said, referring to gold.
Markets are also watching the European Central Bank's policy
meeting on Thursday, which is likely to emphasise that the euro
zone is in a different recovery stage than the United States.
Gold briefly rose early, but soon turned lower as investors
grew nervous ahead of Friday's jobs report.
Two days of short-covering that had helped bullion recover
from its worst quarter on record also evaporated as the dollar
U.S. gold futures for August delivery lost 1.09
percent to $1,242 an ounce.
Spot gold was down 0.81 percent at $1,242.71 at 4:37 p.m.
EDT (2037 GMT), after rising earlier to a near one-week high at
$1,267.20 an ounce.
"Investors have gradually come to the realization that there
is no reason to own the asset class now because at some point
interest rates are going to go up and there is no inflation
anywhere to be seen," said Troy Gayeski, partner and senior
portfolio manager at SkyBridge, which has $7.9 billion assets
under management and advisement.
OIL VAULTS HIGHER
U.S. crude jumped as turmoil in the Middle East unsettled
investors, while signs of tightening supply in the U.S. Midwest
strengthened U.S. crude prices relative to other contracts.
The spread between European Brent and U.S. WTI crude for
September CL-LCO2=R narrowed to less than $4 a barrel, the
narrowest since early 2011, as some traders rushed to cover
short bets. Goldman Sachs closed its trade recommendation
after the spread on the August contracts collapsed from over $23
in February to go well below its target of $5.
U.S. inter-month spreads stretched to their widest in years,
with the Sept/Oct WTI spread CLU3-V3 jumping at one point to a
record high of $1.24, up from just 34 cents a barrel last week.
The dramatic strengthening at the front end of the U.S.
crude oil curve has been tied to the restart last month of BP's
revamped 413,000 barrel-per-day Whiting refinery, which
is expected to help absorb Canadian crude oil that might
otherwise fill up tanks at Cushing, Oklahoma, the delivery point
for the U.S. oil futures contract.
"It reflects expectations that (supplies) are going to be
much tighter in the third quarter," said Addison Armstrong,
director of market research at Tradition Energy in Stamford,
Corn and wheat futures rose in Chicago on bargain hunting.
Futures dropped sharply after Friday's USDA report that showed
farmers planted more corn and soybeans than analysts had
"We got oversold and have exhausted the selling for now,"
said Shawn McCambridge, analyst for Jefferies Bache.
July corn rose 17-1/4 cents to $6.72-3/4 per bushel
amid talk of tight supplies before this fall's harvest, the
December contract rose 1-1/2 cents to $5.02-3/4. July
wheat closed up 3-3/4 cents at $6.49-1/2 per bushel.
NAT GAS HEATS UP
U.S. natural gas futures rose 2 percent, climbing for the
second day in a row, amid technical buying and as heat blanketed
the West Coast, lifting electricity demand.
Traders also noted hotter weather was on tap for the East
Coast next week.
"The main storyline for natgas has been the ongoing heat
wave along the West Coast as well as the changing short-term
weather forecasts," said Energy Management Institute partner
He said the market was in the midst of what was starting to
look like a technical bottom formation, after declining steadily
for almost two weeks.
The nearby contract hit a nearly four-month low of $3.526
per million British thermal units on Friday.
Prices at 4:17 p.m. EDT (2017 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US crude 99.45 1.46 1.5% 8.3%
Brent crude 103.86 0.86 0.8% -6.5%
Natural gas 3.654 0.077 2.2% 9.0%
US gold 1243.40 -12.30 -1.0% -25.8%
Gold 1240.49 -12.31 -1.0% -25.9%
US Copper 3.14 -0.01 -0.4% -13.9%
LME Copper 6910.00 -69.00 -1.0% -12.9%
Dollar 83.575 0.521 0.6% 8.9%
CRB 279.686 1.786 0.6% -5.2%
US corn 672.75 16.50 2.5% -3.7%
US soybeans 1573.00 2.50 0.2% 10.9%
US wheat 649.50 3.75 0.6% -16.5%
US Coffee 124.35 2.75 2.3% -13.5%
US Cocoa 2178.00 19.00 0.9% -2.6%
US Sugar 16.53 -0.16 -1.0% -15.3%
US silver 19.309 19.113 1.5% -36.1%
US platinum 1367.80 -14.70 0.0% -11.1%
US palladium 688.90 2.20 0.3% -2.1%
(Reporting by Josephine Mason; Additional reporting by Anna
Louie Sussman, Eileen Houlihan and Frank Tang; editing by Jim
Marshall and Bob Burgdorfer)