Commodities: Prices rangebound ahead of US-China trade talks

Overall, commodity prices were rangebound on Wednesday, with traders opting to stay put as they waited on the result of the next round of US-China trade talks.

Thus, as of 2000 BST, the Bloomberg commodity index up by just 0.04% at 79.0 as the US dollar spot index drifted lower by 0.01% to 97.62.

Early in the session, citing sources from the US government and the private sector, Reuters reported that at the end of last week China had backtracked on many of the commitments it had agreed to with American negotiators.

And while just before the close of markets in London the White House's spokeswoman, Sarah Sanders, said the US had received "indications" that Beijing did want a deal, many analysts remained cautious.

Commenting on that Reuters report, IG's Chris Beaucamp said: "Further details have emerged detailing the severe breakdown in talks between the US and China - evidently the Chinese government has decided that it cannot afford to make too many concessions to the US [...]

"This puts the two sides back at square one, and it looks like Mr Trump will now listen to the hawks, rather than those such as the Treasury Secretary, who was previously pressing for a resolution."

Many other analysts however were more positive, with JP Morgan boss, Jamie Dimon, putting the remaining odds of a deal at 80%.

Mixed data on Chinese exports and imports in April did little to buoy the mood.

Against that backdrop, the US Department of Energy reported a 4.0m barrel draw (consensus: +1.235m barrels) in oil stockpiles for the week ending on 8 May, despite another drawdown from the Strategic Petroleum Reserve.

"In total, 1.4m barrels of crude have left the reserve in the last two weeks which may point to an active effort by the US administration to ward off fears of supply shortages," said Kieran Clancy at Capital Economics.

Most metals and soft commodities contracts on the other hand came under selling pressure, with traders describing the market action as choppy and nervous, although Morgan Stanley put out a note in which it predicted an at least 10% rise in the average price of COMEX copper by the last quarter of 2019 and into the first three months of 2020.