Commodities: Oil, base metals slip back into the red in European trading

Respite for oil and base metals futures proved short-lived as both markets retreated back into negative territory in European trading on Friday.

Oversupply permutations and end of the week profit-taking sent both oil benchmarks down on yet another day of extreme volatility in the commodities sphere. At 1552 BST, the Brent front month futures contract for August delivery was down 0.70% or 41 cents at $58.20 a barrel, while the WTI was down 0.91% or 48 cents to $52.30 a barrel.

City analysts, along with a host of organisations including the IEA and OECD reckon the supply glut is likely to persist, without even factoring in the possibility of additional oil from Iraq, should there be a successful conclusion to nuclear negotiations.

“Physical oil market fundamentals remain weak and, in the absence of OPEC production cuts or material supply disruption, this is unlikely to change meaningfully,” said analysts at Deutsche Bank.

Meanwhile, a reprieve for base metals on the back of China’s bid to stem its equities sell-off, did not last a full session. Past the midway point in trading on the London Metal Exchange, three-month delivery contracts of primary aluminium (down 0.1%), copper (down 0.2%), lead (down 0.2%), nickel (down 0.1%) and zinc (down 0.2%) were all marginally lower.

However, oversupply in the Asian market continues to clobber tin, with the contract shedding 2.3% or $330 to $13,987.50 per tonne. Meanwhile, the failure of safe haven demand materialising in favour of precious metals, despite the Greek debt crisis, remained a theme.

COMEX gold for August delivery was broadly flat, up a mere 0.03% or 40 cents, at $1,159.60 an ounce, while spot gold was up 0.14% or $1.63 at $1,161.06 with little sign of a meaningful uptick in prices. Analysts at Canaccord expect gold to average $1,185 and $1,171 an ounce in 2015 and 2016 respectively.

Elsewhere, spot platinum stemmed three negative sessions on oversupply concerns to gain $4.09 or 0.40% and recover to $1028.94 an ounce. Additionally, COMEX silver rose 0.58% or 9 cents to $15.45 an ounce.

Agricultural commodities were largely in positive territory with CBOT corn (up 0.64%), wheat (up 0.09%), ICE cocoa (up 0.12%) and cotton (up 1.55%) all trading higher. However, CME live cattle futures contract was down 0.29% or 42 cents at $148.05/lb, caused by a near $10 per 100lb price decline in the US wholesale beef markets, following the conclusion of the country’s 4th of July holiday weekend.