Commodity Roundup: Oil ticks lower as China’s factory output disappoints, gold down

Energy markets ticked lower on Monday at the start of a holiday-shortened week, following crude oil’s largest weekly gain in nearly two months, as traders assessed the demand situation and China’s factory output data, while the escalating crisis in the Red Sea was on the watch as well.

China’s industrial production expanded by 5.6% year-on-year in May, less than market expectations of a 6% rise and easing from a 6.7% growth in the previous month. Retail sales grew 3.7% in May. The data followed a survey on Friday showing U.S. consumer sentiment fell to a seven-month low in June.

“The move higher (in oil) was not unreservedly convincing,” said Tamas Varga of oil broker PVM of last week’s gains. “Further weakness is observed this morning due to sluggish Chinese factory activity,” he told Reuters.

The latest attack comes a day after the Iranian-backed group attacked another ship in the Red Sea. According to the U.S. Defense Intelligence Agency, container shipping through the Red Sea declined by around 90% from December 2023 to mid-February 2024 as a result of Houthi attacks on ships in the key trade route.

Natural gas prices eased as well, following two consecutive weekly declines. As per the latest data, total U.S. oil and gas rigs fell by four to 590 rigs last week, according to Baker Hughes. Natural gas–focused rigs stayed flat at 98 rigs, its lowest since October 2021.

Turning to metals, gold prices moved lower along with other precious metals as the U.S. dollar held steady. On the data front, global investors will closely watch U.S. retail sales data for May and a report on industrial production for the same month, for rate cut clues, after U.S. central bank policymakers reduced their projections for rate cuts to just one this year.

In the base metals space, Chinese monthly primary aluminium production rose 7.2% year-on-year to reach a record high of 3.65mt in May as smelters brought back the idled capacity, ING reported citing National Bureau of Statistics numbers.

Meanwhile, steel inventories at major Chinese steel mills rose to 16.1mt in early June, up 10.4% compared to late May, according to data from the China Iron and Steel Association, ING said, adding, Shanghai Futures Exchange inventory data shows weekly inventories for all the base metals (except lead) fell over the reporting week.

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