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Commodities: Saudi and Russia signal potential for deal to raise output

Commodities sank as Russia and Saudi Arabia said a deal between major producers to boost their oil output might be on the cards and the US dollar raced back towards its best levels in almost a year.
On Thursday afternoon, Saudi energy minister Khalid Al-Falih reportedly said that a deal between OPEC and its allies to raise production gradually was inevitable.

Nevertheless, he also indicated that he expected that such an agreement at the cartel's meeting next week would be "reasonable" and "moderate".

Earlier, his Russian counterpart had broached the possibility of a combined increase in crude output of between 1.5m-1.8m barrels a day, in order to offset the impact of economic sanctions on Iran and lost output in Venezuela due to the mismanagement of its resources.

Their remarks sent front month Brent crude oil futures lower by 1.04% to $75.94 a barrel on NYMEX.

Gasoline and heating oil futures for July delivery on NYMEX were also retreating, by 1.60% and 1.24%, respectively.

It was the same story in agriculture futures, with CBoT wheat for September delivery down by 2.91% at $5.1725 a bushel and corn erasing another 3.31% to trade at $3.7275 a bushel.

Gold futures on COMEX were conspicuously higher, gaining 0.44% to trade at $1,307/oz., even as the spot US dollar index shot higher by 1.29% to 94.7520.

Base metals were weak too, weighed down by the release overnight of a raft of poor activity data in China.

In particular, for the year-to-date fixed asset investment in the Asian giant slowed in May to a year-on-year pace of 6.1% (consensus: 7.0%), prompting some speculation that Beijing might ease policy in the back half of 2018.

On the back of those figures, July 2018 COMEX gold was down by 1.48% to $3.2060/lb..