NEW YORK/LONDON (Reuters) - Oil fell in volatile trade on Thursday as doubts grew about whether producers would agree to cut output and grains markets also reversed earlier gains, while gold and zinc jumped to their highest in more than three months, buoyed by a weaker dollar.
Brent crude dropped, turning down on oversupply and skepticism that Venezuela’s effort to lobby crude producers for output cuts would succeed.
Prices have recovered more than 25 percent since falling to $27.10, the lowest since November 2003, on Jan. 20.
In agricultural markets, U.S. wheat futures fell more than 1 percent on disappointing export sales data. Corn was also down, giving back an early advance. Ample world supplies weighed, given improving harvest prospects in Brazil and Argentina.
With crude and grains reversing earlier losses, the Thomson Reuters Core Commodity Index was down 0.5 percent. The bellwether for world commodities had been up earlier in the session after rallying 2.5 percent during the previous session.
A collapse in expectations of a further rise in U.S. interest rates this year drove the dollar index to its biggest daily fall in more than two months on Wednesday.
The dollar hit its lowest levels in more than three months against a basket of currencies.
“The (Fed funds futures) now sees only a 12 percent probability of a rate hike in March so I am not expecting the price of gold to drop soon,” said Bernard Dahdah, an analyst at Natixis, adding he expected it to trade around current levels in the next two months.Spot gold touched $1,157 an ounce on Thursday, its highest since late October, extending a rally seen on Wednesday as bullion prices notched their biggest daily gain since Jan. 20.
Rising U.S. rates make a non-yielding asset such as gold less attractive.
Gold has now gained about 9 percent since the start of this year as uncertainty about the health of the global economy has made financial markets volatile, pushing investors into safer assets.
The index of 19 commodities is down nearly 7 percent this year after dropping by a quarter in 2015 to hit its lowest level since 2002 in December, as commodities ranging from iron ore to oil took a battering.
Industrial metals also rose on Thursday.
Benchmark zinc on the London Metal Exchange surged to a peak of $1,728 a tonne, the strongest since Oct. 29, on concern about potential shortages before paring gains.
Additional reporting by Susan Fenton, Alex Lawler, Gus Trompiz and Colin Packham; Editing by David Evans and Bill Trott
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