Commodities markets summary

A summary of trading in key commodities markets overseas:

ENERGY

Oil prices have climbed in a modest rebound from a sharp sell-off after a mixed US petroleum report showed an increase in crude inventories and a decline in production.

US benchmark West Texas Intermediate for October delivery rose 84 cents to $US46.25 ($A65.84) a barrel on the New York Mercantile Exchange on Wednesday.

In London, Brent North Sea crude for October closed at $US50.50 a barrel, a gain of 94 cents from Tuesday's settlement.

The oil market turned sharply lower on Tuesday, snapping a strong three-day rally, after weak manufacturing data from China and the United States further clouded the outlook for demand growth in the two biggest energy consumers.

Rising supplies and lacklustre demand growth have spurred oil's steep decline since mid-2014, when crude fetched more than $US100 a barrel.

Traders pored on Wednesday over the latest US weekly oil report from the Department of Energy. Commercial crude inventories rose by 4.7 million barrels to 455.4 million barrels in the week ending August 28, staying near eight-decade highs.

The increase was much bigger than the 900,000 barrels on average expected by experts Bloomberg News surveyed.

"The unexpectedly sharp build reminds traders about the excessive supply of the stuff in the US, which should continue to weigh on prices for the foreseeable future," said Fawad Razaqzada, an analyst at Forex.com.

US crude production, meanwhile, fell by 119,000 barrels to 9.22 million barrels a day. Gasoline inventories fell by 300,000 barrels to 214.2 million barrels.

"Oil inventories are unlikely to be reduced meaningfully in the short term because not only is the summer driving season coming to an end but there is also the usual refinery maintenance works that will take place soon, meaning weaker demand - particularly for gasoline," Razaqzada said.

Commerzbank analysts highlighted the market's extreme volatility.

"The volatility index for crude oil has all but doubled in the past two weeks and reached its highest level since mid-March yesterday," they said in a research note.

"It is therefore virtually impossible to make any reliable predictions about near-term price performance at the moment - indeed such predictions hardly have even a half-life of a few hours right now."

PRECIOUS METALS

Gold has eased as a rebound in stocks and the US dollar arrests a four-day rise, with uncertainty over the timing of a looming US rate rise limiting price moves ahead of key US non-farm payrolls data on Friday.

The metal on Wednesday retreated from early highs as global stock indexes recovered some of their recent losses, drawing support from reports of brokerage measures in China to invigorate the country's battered markets.

Gold also came under pressure from the 0.5 per cent rise of the US dollar index.

Spot gold was down 0.5 per cent at $US1,134 an ounce at 2.48pm EDT (0448 Thursday AEST), while US gold futures for December delivery settled down 0.5 per cent at $US1,133.60.

"We have to wait until we actually see the payrolls numbers this Friday," Capital Economics analyst Simona Gambarini said.

"We don't really expect much movement in the gold price (ahead of that). Investors are just waiting on the sidelines to see what the Fed will decide."

Traders remain wary of taking up fresh positions until they receive more clarity on when the Fed will press ahead with its first rate hike in nearly a decade.

Low interest rates cut the opportunity cost of holding non-yielding bullion while also pressuring the US dollar.

The Fed has pegged the likelihood of a rate rise to the strength of US data. The August US non-farm payrolls report on Friday is being closely watched, Mitsubishi analyst Jonathan Butler said.

"Attention will inevitably turn to the fact that December is now looking the most likely for lift-off on rates, and maybe the market will start to price that in," he said.

Data on Wednesday suggested that US labour market momentum likely remains strong enough for the Fed to consider an interest rate hike this year.

Of the precious metals, palladium has been the most volatile and rose 3.4 per cent to a session high at $US586.50 an ounce after Tuesday's 5.3 per cent tumble.

ABN Amro analyst Georgette Boele said in a note that palladium prices should drop further this year, forecasting $US525 at the end of 2015, though downward pressure was seen easing.

"Autocatalyst demand from emerging markets, especially China and Brazil, will remain weak. We expect the trend in weaker car sales in China to continue into the first half of 2016," Boele said.

Among other precious metals, silver was up 0.5 per cent at $US14.64 an ounce and platinum was up 1.0 per cent at $US1,010.24.

BASE METALS

Copper has risen, after Chinese equities pared losses following further government intervention and as investors grew nervous about betting down a metal trading near six-year lows.

A number of brokerages in top copper consumer China have pledged additional funds to buy equities, answering government calls to support the stock market and easing fears that Beijing may be intensifying a trading crackdown.

"We remain constructive on copper. The China story is over-played versus actual (copper) demand conditions which, while not thrilling, haven't deteriorated as much as the price implies," said Macquarie analyst Vivienne Lloyd.

"Chinese shorts don't seem convinced (about selling) at the moment, London Metal Exchange stocks are falling, (Chinese) bonded stocks are down (and) copper is showing resilience above $US5,000."

Three-month copper on the London Metal Exchange ended up 1.1 per cent at $US5,120 a tonne, after a 1.3 per cent drop the previous session. Copper hit its weakest level in six years at $US4,855 a tonne at the beginning of last week.

In the United States, data showed private payrolls rose steadily in August, nonfarm productivity increased sharply in the second quarter and new orders for factory goods rose for a second straight month in July.

Still, investors are betting on more help from major central banks after data on Tuesday showed that China's manufacturing industry contracted and eurozone and US growth eased in August.

Elsewhere, copper found support from a larger drop in LME prices compared with those in China, which have turned Chinese imports profitable. China consumes nearly half the world's copper.

"Shorts (in China) are possibly covering a bit. It seems they have been covering for a couple of days now," said Justin Lennon, analyst at Mitsui Bussan Commodities.

On the LME, data showed funds' net 'long', or buy, position rose last week.

In news, Ok Tedi Mining Ltd's Papua New Guinea copper mine is likely to stay shut until the first quarter of 2016 as an intensifying El Nino worsens drought conditions.

Nickel closed up 0.5 per cent to $US9,800. Indonesia has reaffirmed it will keep its export ban on nickel ore. Media reports had suggested the country might relax curbs to prop up its slowing economy.

Tin closed up 3.8 per cent at $US15,225. Cash tin traded at a $US400 a tonne premium against the three-month price on Wednesday, near its highest since 2009 and indicating tight nearby supply.

Indonesian tin companies halted exports when new rules for shipments were introduced on August 1. But some, including PT Timah, have since received licences to export, suggesting physical market supply tightness should be short-lived.

Aluminium ended down 0.2 per cent at $US1,600, zinc closed up 0.4 per cent at $US1,818 while lead ended down 0.8 per cent at $US1,715.

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