Oil

Speculation about possible talks between the Organisation of the Petroleum Exporting Countries and other oil producers to cut output increased volatility in the oil markets.

Analysts said prices had recovered on a sliding dollar and from ongoing and yet unconfirmed, talk of a potential meeting of oil producers to cut output in support of prices, which have fallen around 70pc since mid-2014.

Brent traded above $35 a barrel on Thursday, adding to the previous session’s 7pc jump, after an Iranian official was quoted as saying Tehran supported a meeting, raising hopes that they could take action to support prices despite widespread scepticism in the market

The dollar extended its drop for a second day, making greenback-denominated commodities cheaper for holders of other currencies, with the dollar index DXY hitting its lowest level in more than 3-1/2 months on continued scepticism that the US Federal Reserve would be able to hike interest rates this year.

Despite this, analysts said prices would remain low in 2016 and 2017 as production stays high, global demand slows, and inventories swell.

President Obama is proposing a $10-a-barrel oil tax, phased in over five years, to pay for a variety of transportation initiatives, including new rail corridors, highway projects, pilot projects for self-driving cars and other technologies that falls under the goal of a ‘clean transportation ‘ system.

Royal Dutch Shell became the latest big energy company to file a damage report on the impact of depressed oil prices, saying that its adjusted profit fell 56pc in the fourth quarter of 2015 compared to a year earlier. Shell said earnings adjusted for inventory changes were $1.8bn, down sharply from $4.2bn in the comparable period of 2014. For all of 2015, its earnings fell 80pc to $3.84bn, compared with $19bn in 2014.

In an immediate move to preserve capital, Shell said it would postpone two major projects: a liquefied natural gas operation in Canada and a deep water oil and gas development off Nigeria.

Shell’s diminished earnings came as ConocoPhillips, the third largest American oil company, announced that it was slashing its dividend by two-thirds, and that it posted a $3.5 billion loss in the fourth quarter, compared with a net loss of $39 million the year before.

Low prices for oil and natural gas were responsible for a drop in ConocoPhillips revenues of 42 percent to $6.8 billion. The company also wrote down the value of its oil properties and exploration assets by $2.2 billion.

Gold

Amid the market volatility in 2016, gold futures prices are already up nearly 8pc this year.

After posting three consecutive years of losses and falling to the lowest level in six years back in November, gold prices are once again on the rise as investors seek shelter from the global volatility in the commodity known for its safe haven appeal. On Wednesday, bullion hit an intraday high of $1,146 per ounce, the highest level since October. Known for its haven status, it seems gold has regained its status as a go-to investment option amid the recent market turmoil.

Spot gold hit $1,155.30 an ounce on Thursday, its highest since October 29 on buying triggered by a tumbling dollar after weak US data and on perceptions that US interest rates could be lower this year than previously expected.

Gold was last above $1,200 in June 2015 when equity market volatility sent investors scrambling for safety. Gold typically rises when the dollar slides and falls when the dollar rises. The link is with interest rates, which when they rise also push up the opportunity cost of holding the metal, which earns no yield and costs money to store and insure.

A safe-haven appeal made gold one of the few popular investment spaces at the start of this year when the markets turned upside down. While the major benchmarks — Dow, S&P 500 and Nasdaq — are striving to return to positive territory, gold has witnessed a strong rebound.

This precious metal went through a rough patch over the past three years and touched the six-year low level after the Fed opted for a rate hike last December. Mutual funds having significant exposure to securities related to gold, struggled alongside.

And like a true ally, a strong rebound in gold has also lent a solid boost to these funds in the year-to-date frame.

Spot price of gold on the New York Mercantile Exchange has gained nearly 5.2pc so far this year. In fact, the yellow metal has been the best-performing non-agricultural commodity so far this year. Moreover, SPDR Gold Shares (GLD), which tracks the performance of gold bullion, has attracted nearly $959.2 million in assets this year.

Copper

Copper prices hit their highest level since the start of the year on Thursday as a weaker dollar sparked investor demand for the industrial metal and drove bearish traders out of the market.

Copper futures for the most actively traded March contract rose 1.8pc to settle at $2.132 a pound on the New York Mercantile Exchange, their highest price since Dec 31.

Since plumbing their lowest levels since early 2009 in mid-January, copper prices have rallied 9.8pc.

Investors dumped the dollar amid falling interest rates in the US and continued nervousness about global economy.

The WSJ Dollar Index, which compares the greenback against a basket of 16 commonly traded currencies, fell to the lowest level in a month.

The forecast for the average copper price this year at $4,858 a tonne is the lowest since the average of $3,600 in 2005 when the commodities super-cycle was starting, fuelled by China’s industrialisation and urbanisation.

Published in Dawn, Business & Finance weekly, February 8th, 2016