Commodities: Base metals, oil market rout continues in Europe

Oil and base metals prices continued to slide in European trading on Wednesday, with the Chinese economy heading for a correction and worries about a Greek debt default spooking traders.

As the Chinese equities selloff continued, and doubts over its economic performance lurked around, trading on the London Metal Exchange remained in negative territory. Past the midway point in the session, three-month contracts of primary aluminium (down 1.4%), copper (down 1.3%), lead (down 0.5%), nickel (down 2.3%) and tin (down 0.5%) were firmly in the red.

Nickel, copper and aluminium were seen at three-year lows, while iron ore was trading at a six-year low with little respite in sight and analysts opining that China – the world’s leading importer of industrial metals – was heading for a painful correction.

Precious metals fared marginally better after heavy overnight declines. At 1636 BST, COMEX gold for August delivery was up 0.64% or $7.40 at $1,160 an ounce, while spot gold was up 0.57% or $6.64 at $1,161.90. Concurrently, COMEX silver for September delivery was up 0.98% or 15 cents at $15.12 an ounce. However, spot platinum continued to slide on oversupply concerns, trading down 0.66% or $6.85 at $1,032.40 an ounce.

Oil benchmarks were also trading lower for much of the Asian and European morning session. Late afternoon trading brought a modicum of stability, only for it to be lost yet again as US volumes started picking up.

At 1646 BST, the Brent front month futures contract for August delivery was down 0.53% or 30 cents at $56.55 a barrel, while the WTI was down 1.97% or $1.03 at $51.30.

Kit Juckes, head of forex at Societe Generale, said, “The Chinese authorities' attempts to stabilise the equity market are not working. Asian equity markets are lower across the board and the symbiotic relationship between the Chinese economy and global commodity markets is once again highlighted as iron ore, copper, gold and oil prices all fell overnight.

“The result is that the dollar and yen are riding high and emerging market forex, and commodity-sensitive forex are weaker.”

Finally, on the agricultural commodities front, CBOT wheat (down 0.30%), ICE cocoa (down 0.18%), cotton (down 1.21%) or CME live cattle (down 0.63%) were all trading lower, but CBOT corn rose 1.06% or $4.50 to $427.75 a bushel, on tighter supply scenarios.