Commodities Corner: Whippy Bonds Leave their Mark

By Glenn Dyer | More Articles by Glenn Dyer

As bonds and currencies thrashed around last week commodities were left in disarray and on Friday sharp falls saw the big gains over the month were clipped at the very end.

Oil, iron ore and copper starred but gold was left behind over February.

Comex April gold futures settled 2.6% lower at $US1,728.80 an ounce to take the loss for February to more than 6% which was its worst month since November 2016.

Factors including rising bond yields, falling bond yields, messy currencies and investor unease at what is a misplaced, confected worry about inflation in 2022 or 2023.

Comex silver fell -losing 3.4% on the day to end around $US26.70.

Copper recoiled after touching successive multi-year peaks in six consecutive sessions, falling more than 3% as risk-off sentiment hit wider financial markets after a spike in bond yields.

Three-month copper on the London Metal Exchange (LME) slumped to $US9,120 a tonne and on Comex front month copper lost 3.7% to end at just over $US4.10 a pound. But that was still up 16% for February.

Oil fell. Brent crude futures settled down 75 cents at $US66.13 a barrel and US West Texas Intermediate crude futures fell $US2.03 to settle at $61.50 a barrel.

But like copper both oil contracts did enjoy a good month in February – Brent rose more than 17% and WTI was up more than 18%.

US oil firms added oil and natural gas rigs for a seventh month in a row in February, but the rate of growth slowed even as oil prices rose to their highest since 2019.

The oil and gas rig count, an early indicator of future output, rose five to 402 in the week to February 26, its highest since May, energy services firm Baker Hughes Co said in its latest weekly report.

The total oil and gas rigs rose for a seventh month in a row for the first time since May 2018.

But only 18 rigs were added to the count, compared with 33 in January and 31 in December, partly due to a rare deep freeze in Texas last week and also oil companies’ continuing commitment to disciplined investment.

The total count is still 388 rigs, or 49%, below this time last year but it is up sharply since hitting a record low of 244 in August.

The number of oil directed rigs rose by 4 to 309 last week, their highest since May, while gas rigs rose one to 92.

But February, while oil rigs rose for a sixth straight month, the rise of 10 was the smallest monthly gain since September.  Oil rig use growth slowed from a rise of 28 in January and 26 in December.

Iron ore prices remained firm on Friday and for the month as a whole.

The price of 62% Fe fines delivered to northern China rose $1.54 on Friday to $US175.78. That was a gain of around 11% or $US17.24 a tonne over February.

The price of 65% Fe fines delivered to northern China (From Brazil) rose $US1.66 a tonne to$US197.40. For February the price was up $14.80 a tonne or 8%.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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