Oil

PRICES of oil and gold swung wildly in early Asian trade Friday morning as market sentiment swayed amid the Brexit vote count.

Crude oil futures fell sharply, reversing overnight gains and after US Crude held steady in earlier after-hours trading. Benchmark light, sweet crude oil on the New York Mercantile Exchange was recently down 3.3pc at $48.47/barrel, after settling 2pc higher in the US session, while Brent crude prices were 3.1pc lower at $49.32/barrel, after settling 2 .1pc higher at $50.91/barrel.

Oil prices rose by up to 2pc on Thursday, shrugging off a smaller than expected draw on US crude stocks as money and equity markets firmed after the last sweep of Brexit opinion polls raised optimism over Britain remaining in the EU.

Global markets, including commodities, have been on tenterhooks for weeks ahead of Britain’s referendum on European Union membership on Thursday. Global benchmark front-month Brent crude LCOc1 was trading up 93 cents at $50.81/barrel. It touched an intra-day high of $50.90/barrel, up $1.02 from Wednesday’s close. US futures stood at $49.92, up 79 cents.

A day earlier oil prices had slipped after the US government reported a smaller-than-expected inventory drawdown, and as investors fretted about Britain’s upcoming vote on whether to stay in the European Union.

Crude futures rose in early trading, with global benchmark Brent and US crude’s West Texas Intermediate (WTI) both trading above $50/barrel at one point. Prices headed lower after the US Energy Information Administration (EIA) reported a stockpile decline of 917,000 barrels for the week ended June 17. Brent’s front-month contract, August, settled down 74 cents, or 1.5pc, at $49.88/barrel.

Saudi Arabia’s new oil minister has indicated that Saudi Arabia is preparing to reassert a degree of control over the market after two years of letting prices fall.

Fearing that US shale, Canadian tar sands and ultra-deep water crude was taking too much of the market, Saudi Arabia let prices fall to squeeze out more expensive producers, leading many to say the cartel had lost relevance as prices tumbled.

US shale output has declined since peaking just over a year ago, but the recovery in prices to around $50/barrel has led to a pick-up in drilling by companies.

Opec said its oil revenue plunged by $438bn to a 10-year low in 2015, as an increase in export volumes failed to compensate for the collapse in prices.

Oil futures tumbled by 35pc last year as US crude production held up despite the Saudi-led strategy to pressure Opec’s competitors with lower prices. Crude has since recovered, rising almost 90 per cent in London from the lows reached in January, as US output retreats and disruptions from Canada to Nigeria help whittle away a global surplus.

Gold

GOLD prices fell to a two-week low Thursday as investors awaited results from the UK referendum.

Gold for August delivery was recently down 0.4pc at $1,265.10/troy ounce on the Comex division of the New York Mercantile Exchange, on track for its fifth straight day of losses.

Gold prices slid Wednesday for the fourth session in a row.

Gold for August delivery settled down 0.2pc at $1,270.00/troy ounce on the Comex division of the New York Mercantile Exchange, marking its fourth consecutive day of losses and hitting a two-week low during the session.

The precious metal has rallied in recent weeks on fears Britain may leave the EU.

Demand for gold bullion has surged as people have snapped up coins and bars, according to the Royal Mint. Since the start of June, transactions on the Royal Mint’s online trading platform have increased by 32pc from the previous month and revenue has jumped by almost 150pc.

Investors turn to gold in times of uncertainty because it is seen as an asset with intrinsic value and has a history of maintaining or increasing its worth when other asset prices are falling.

Along with the EU referendum, gold prices have risen with expectations of a US interest rate increase and fallen when the Federal Reserve have been considered less likely to raise borrowing costs.

Copper

COPPER prices rose to their highest level in seven weeks Thursday, helped by a weaker dollar.

Copper for September delivery settled up 1.4pc at $2.1655/pound on the Comex division of the New York Mercantile Exchange, marking its fifth consecutive day of gains and hitting its highest price since May 6.

Copper, mainly used in power and construction, has mostly traded in a $4,500 to $5,000 range this year and price movements in recent weeks have been largely related to the US currency.

Falls in the dollar make commodities cheaper for buyers in other currencies and support demand.

One factor limiting the upside for industrial metals has been slow demand growth in top consumer China. Another is an oversupplied market, particularly of aluminium.

London copper pulled back on Friday from a seven-week top touched in the previous session on caution over results from Britain’s referendum on whether to leave the European Union.

Three-month copper on the London Metal Exchange was down 0.4pc at $4,760/tonne. It touched its highest since May 6 at $4,795/tonne in the previous session.

Shanghai Futures Exchange copper trimmed early gains of 1.3pc to 36,510 yuan ($5,543) a tonne, still up 0.8pc.

Adding to a surfeit of global mine supply, Zambia’s copper production will rise by 5.5pc to 750,000 tonnes this year and output is expected to double to 1.5m tonnes in 2017.

Published in Dawn, Business & Finance weekly, June 27th, 2016