Commodities Adopt A Sluggish Pace

The tiff over oil production and China’s new policy on base metals were some of the factors that impacted the commodity markets across the globe

The Organization of the Petroleum Exporting Countries (OPEC) and their allies failed to reach an agreement on a change in the production policy and all further negotiations have been postponed indefinitely. This sent the crude oil soaring to a six-year high of USD 76.98 per barrel during the fortnight. The resurgence of economies globally is driving demand for the black gold. Hence, OPEC Plus leaders Saudi Arabia and Russia proposed to increase production by four lakh barrels per day each month from August 2021 till the end of the year. However, the United Arab Emirates (UAE) rejected this proposal.

They have demanded to increase their own production quota, which would allow them to escalate output and earn more revenues. Nevertheless, exacerbating increase in the Delta variant of the corona virus and stricter curbs in Europe, Asia and Australia limited gains in crude oil. Crude oil gained 0.69 per cent and Brent oil lost 0.83 per cent during the fortnight. Base metals experienced buying on the back of healthy demand, shrinking inventory levels and supply concerns. There hasn’t been any material impact of China selling zinc, copper and aluminium from its state reserves via public tenders to domestic manufacturers and processors in an attempt to fend off any inflationary pressures.

"Base metals experienced buying on the back of healthy demand, shrinking inventory levels and supply concerns."

Aluminium prices also surged as Russia plans to impose a 15 per cent export duty tax on aluminium with a minimum rate of USD 254 per ton from August 1, 2021 till the year end. To give a gist of the movements during the fortnight – MCX Lead was the top gainer, up by 4.62 per cent. Consequently, MCX Zinc, MCX Copper and MCX Aluminium also climbed by 3.39 per cent, 1.40 per cent and 1.28 per cent, respectively. Gold prices traded near their two-month lows in the first week of the fortnight on account of mixed signals from the US Federal Reserve on the policy front and a strengthening US dollar.

However, the shiny metal staged a decent rebound, based on the rise in Delta variant cases across Asia and Europe. MCX Gold closed at Rs 47,923, extending gains by 2.13 per cent. Likewise, MCX Silver was also bullish and soared 2.10 per cent to close at Rs 69,297. Meanwhile, cotton prices remain undeterred and persisted to climb 3.40 per cent higher. Investors should be mindful of China’s National Food and Strategic Reserves Administration’s recent announcement that they intend to continue releasing more inventories of base metals to ensure stability in market prices.