Commodity Capsule: Oil fell on Wednesday as lacklustre economic data in China weighed on demand sentiment.

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China factory activity shrunk for the fourth month in January, although the data is in line with expectations.

Prices were set for their first monthly gain since September as broadening Middle East conflicts raised supply concerns.

Brent crude futures for April is hovering close to $82 a barrel. Both the crude oil benchmarks are set to rise 7-8 per cent in January.

Manufacturing activity in China contracted for the fourth straight month in January, an official factory survey showed on Wednesday.

Forecasts from several analysts, including from OPEC, see oil demand growth in 2024 driven primarily by Chinese consumption.

Crude oil prices have support as the Israel-Hamas war has expanded to a naval conflict in the Red Sea between the US and Iran-aligned Houthi militants.

The conflict is disrupting oil and natural gas tanker shipping routes and adding to delivery costs.

Gold prices were on track for their first monthly decline in four months

Investors toned down their estimate of rapid and deeper rate cuts in the US in the face of a resilient economy.

Traders await remarks from the Federal Reserve due later in the day.

Global gold futures are hovering two-week high of $2048.12 for April delivery.

Traders priced in about 130 basis points (bps) of Fed rate cuts for this year, down from bets of more than 160 bps at the end of 2023.

Money market pricing shows that the chances of a March rate cut have dropped to 43 per cent, from about 90 per cent a month ago.

The dollar index was on track to mark its best month since September, with an over 2 per cent gain so far in January.

London copper prices were subdued on Wednesday ahead of the conclusion of the US Federal Reserve's two-day meeting.

The red metal is headed third monthly gain amid supply disruption.

Copper on the London Metal Exchange is hovering past $8,600 per metric ton. The contract has gained 0.5 per cent so far this month.

Fed is expected to leave interest rates unchanged on Wednesday and investors will focus on any clues from Fed Chair Jerome Powell on the likelihood of a rate cut in March.

Weighing on the market was demand from, with expectations of more stimulus by Beijing to shore up a fragile economic recovery amid a housing crisis.

Mine closure in Panama's Cobre mine and lowered production guidance by global miners caused disrupted supply and led to Chinese smelters' mulling on production cuts.

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