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Commodities See Profit-Taking, Agriculturals and Iron Ore Outperform

The base metals complex has been seeing similar profit-taking hitting prices for the most part today, following on from the fairly decent gains made yesterday, with the notable exception of iron ore, which approached 8-month highs in Asia overnight. This was in large part due to the ongoing floods in Australia
Commodities See Profit-Taking, Agriculturals and Iron Ore Outperform

Commodities are seeing a rather mixed session today, with profit-taking pressuring prices somewhat even as a stronger euro helps spur demand.

Brent crude was seen at almost $99/bbl yesterday, once again leaving most to think it is only a matter of time before the key $100/bbl level is topped, with many suggesting WTI crude, which currently holds around $92/bbl, will follow suit.

Although the shut down of two North Sea fields has undoubtedly helped this price appreciation, much of the move has come in line with the broader risk appetite at the start of the year, and as the price approaches $100, a great amount of speculation from financial investors is likely to push prices higher. The Alaskan oil pipeline was re-opened yesterday, albeit at the much smaller 0.6 million barrels per day (bpd), around two-thirds of its normal capacity, with the supply loss so far estimated to be around 2.5 million barrels of crude.

The  Energy Information Administration (EIA) weekly oil inventory report yesterday showed a 2.2 million barrels (mbls) reduction in crude stocks for the week, slightly better than expected, although sentiment was offset by the 5.1mbls build in gasoline inventories, and the 2.7mbls build in middle distillates - both much higher than expected. This also came as somewhat of a contradiction to the 1.6 percentage point fall in refinery run rates in the week, down at 86.4%.

The precious metals complex is once again holding fairly neutral today, lacking any real direction despite currency moves in favour of European demand. This lack of direction is shown very clearly on the technical front for spot gold, which has effectively hovered around the $1,380/oz level since November. The rate did manage to break back above the 55-day moving average at $1,381/oz earlier this week, although the 21-DMA at $1,387/oz is holding as overhead resistance. A break above here would open up moves back towards record highs around $1,430/oz, while a retracement back below the 55-DMA would post additional signs that stronger consolidation may be in the cards, while 10-day momentum and the daily stochastics both hold in rather neutral territory.

The base metals complex has been seeing similar profit-taking hitting prices for the most part today, following on from the fairly decent gains made yesterday, with the notable exception of iron ore, which approached 8-month highs in Asia overnight. This was in large part due to the ongoing floods in Australia, which are having an impact on the region's mining industry and shipments from this key iron supplier to the Asian region. This was exacerbated as heavy rains in both Brazil and India, the world's top two iron ore exporters, now also look set to disrupt supplies.

The agricultural complex is outperforming other commodities today, with most prices making fair gains after the US Department of Agriculture (USDA) supply estimate report yesterday. The report revised downwards almost all of its crop estimates, with a reduction in the corn yield expected to reduce stocks to 745 million bushels by the end of the crop year - the lowest point since 1995/96. The reports painted a less critical picture for wheat, where it expects inventories to fall to 818 million bushels by the end of the crop year. For soybeans, the report estimates stocks will fall to 140 million bushels this year, and accordingly, estimates the stocks-to-use ratio will fall by around 4% to the lowest point in 46 years.

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