Oil

In the New York market, oil price rose on November 29, for the first time last week on optimism that US lawmakers will resolve a budget fight to avert an economic slowdown and on increasing Middle East tensions that stoked fears about disruptions to oil supplies.

Brent January crude oil futures rose $1.25 to settle at $110.76 a barrel topping its 50-day moving average price of $110.58. The international benchmark crude traded as high as $111.30 a barrel during intraday activity and as low as $109.70.

Earlier, oil dropped to the lowest level in almost two weeks as concern mounted that negotiations to address the US budget deficit will fail.

Crude for January delivery declined 69 cents to $86.49 a barrel on the New York Mercantile Exchange, the lowest settlement since November 15. Prices are down 12 per cent this year. Brent oil for January settlement declined 35 cents, or 0.3 per cent, to end the session at $109.51 a barrel on the London-based ICE Futures Europe exchange.

Prices also pared losses after the energy department said crude supplies declined 347,000 barrels to 374.1 million in the seven days ended November 23. They were forecast to rise 350,000 barrels, according to estimates.

Output climbed by 108,000 barrels a day to 6.82 million last week, the highest level since February 1994, the report showed. Production has climbed 12 weeks, the longest stretch of gains since at least 1990. The gain has come as new technology unlocked supply in fields such as the Bakken shale in North Dakota and the Eagle Ford in Texas.

Gasoline inventories surged 3.87 million barrels to 204.3 million, the biggest increase since July and more than four times a projected gain of 900,000. Supplies of distillate fuel, a category that includes heating oil and diesel, fell 800,000 barrels to 112 million, versus an expected increase of 500,000. Total fuel demand dropped 2.4 per cent to 19 million barrels a day last week, the report showed. Gasoline consumption decreased 5.3 per cent to 8.43 million.

In the New York market, oil prices fell on November 27, hit by expectations that fuel demand will remain weak next year, even if the US Congress reaches a deal to avoid the looming ‘fiscal cliff’. Comments by US House Speaker John Boehner voicing optimism that Republicans could broker a pact with the White House to avoid an impending budget crisis at the year-end helped lift crude off early lows and turn US stocks higher.

Additional pressure came as part of a broader commodity selloff centred in metals markets, with gold dropping 1.5 per cent in the biggest one-day drop in nearly a month, market players said.

Commerce department data, showing new US single-family home sales fall slightly in October, also weighed on prices. The prior month’s pace of sales was also revised sharply lower, casting a small shadow over what has been one of the brighter spots in the US economy.

Brent crude fell 36 cents to settle at $109.51 a barrel. The international benchmark traded as low as $108.44 a barrel during intraday activity, breaking below the 20-day moving average of $109.39 before recovering to settle above it. US crude shed 69 cents to settle at $86.49 a barrel, near the 14-day and 20-day moving averages of $86.71 and $86.54 a barrel, respectively.

The US budget debate is the latest economic factor to hold sway over oil markets, which have been closely watching the euro zone crisis in recent months and watching macro data for signs of potentially weaker fuel demand.

Traders have also been closely watching the mounting political crisis in Egypt and escalating violence in Syria for signs of increasing risks to exports from the region, which supplies a third of the world’s oil. Some experts argued the risk to oil supplies could soon trump global demand woes.

US gasoline supplies gained 3.87 million barrels last week, the energy department figures showed. They were forecast to rise 900,000 barrels, according to estimates. Distillate inventories, a category that includes heating oil and diesel, fell 800,000 barrels, compared with a projected increase of 500,000.

Japan’s crude imports from Iran fell 48 per cent in October from September to 469,024 kilolitres, or about 95,000 barrels a day, according to data from the ministry of finance. That’s the second-lowest level since the US exempted the Asian nation from sanctions targeting the Middle East country’s nuclear program. Imports declined 63 per cent from a year earlier.

Gold

In the London market, gold firmed on November 29 in line with stocks and other commodities, further retracing the previous day’s sharp fall, as renewed optimism that a deal will be reached to resolve the US fiscal crisis boosted appetite for assets seen as higher risk.

World shares hit three-week highs and commodities rose as comments from a senior US lawmaker raised hopes of a budget deal by year-end to avoid a fiscal crisis in the world’s biggest economy.

House of Representatives Speaker John Boehner voiced optimism on November 28 that Republicans could broker a deal with the White House to avoid a $600 billion crunch of spending cuts and tax hikes dubbed the ‘fiscal cliff’.

The implications of the cliff for gold are unclear. Protracted talks, which could heighten risk aversion, may be positive if they spark buying of the metal as a haven from risk, but in the short term, hopes for a quick resolution are benefiting gold as it keeps pace with stocks.

Spot gold was up 0.2 per cent at $1,723.51 an ounce, after tumbling 1.3 per cent in the previous session due to a heavy bout of stop-loss selling. US gold rose $7.60 an ounce to $1,724.10.

Gold prices found good support at $1,720 an ounce earlier, a key retracement of the decline from its October high of $1,795.69 an ounce to its November low at $1,672.24, and the location of its 30-day moving average. Dealers said cheaper gold prices after the technically driven sell-off on November 28 augured well for increased buying of physical metal.

Gold importers in India, the world’s biggest buyer of the metal, sprang back in action, accumulating stocks in small quantities, as prices fell to hit their lowest in nearly two weeks.

Holdings of the SPDR Gold Trust, the world’s biggest gold-backed exchange-traded fund, hit a record high for a second consecutive day, underlying buoyant investment interest. Its holdings stood at 1,347.018 tonnes on November 28, up nearly 11 tonnes so far this month  and on course for its fourth month of straight gains.

Spot silver was up 0.1 per cent at $33.76, while the gold-silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, stood at 51.1, hovering above a two-month low.

Spot platinum was up 0.9 per cent to $1,617.75, and palladium was up 0.6 per cent at $676.60.

Copper

In the London market, copper rose to its highest in more than a month on November 29 as the dollar fell and the euro rose on signs the bloc’s debt crisis had started to ease and on optimism US lawmakers will agree a deal to avert higher taxes and spending cuts.

The US economy also grew faster than initially thought in the third quarter, helping to lift investor sentiment. A benchmark world stock index hit a three-week high.

Three-month copper on the London Metal Exchange hit $7,943 a tonne, the highest since October 23. It was untraded at the close, but bid at $7,899.5 from a last bid of $7,765 on November 28.

Aluminium and zinc each touched seven-week highs.

Copper, which fell half a per cent on November 28 has gained about five per cent since touching a two-month low of $7,506 on November 9 after worries about weak demand and potential for the US fiscal cliff to send the world’s largest economy back into recession.

LME copper stocks are down by a third this year. Still, there was concern by some analysts that underlying physical demand for metals was still sluggish as the world economy fights to gain momentum.Industrial metals rallied with copper and aluminium breaking above technical levels as investors were encouraged by the rise in European equity markets as well as the euro.

Hopes of a US budget compromise triggered a recovery in risk appetite among investors, pushing metals prices higher.

Aluminium jumped above its 200-day moving average of about $2,023 a tonne and copper rallied above its 100-day average of $7,807 a tonne, prompting technical buying and covering of bearish positions.Copper for three month delivery on the London Metal Exchange gained as much as 2.5 per cent to a one-month high, and was later trading at $7,893 a tonne, up 1.9 per cent. Aluminium jumped 3.5 per cent to a seven-week high before trading at $2,060.50, up 3.1 per cent.

Traders said there was little fundamental news to support the price rallies, noting that copper inventories remained relatively high in China, the largest importer of the commodity.

While commodities analysts expect a pick-up in Chinese industrial activity to help a recovery in demand for metals, iron ore prices have fallen to a one-month low.

Traders said buying from Chinese steelmakers had been on the wane after a rally that pushed the commodity 35 per cent higher over the past three months.