Commodities: Oil continues to slip, base metals trade sharply lower in Europe

Concerns over the oil oversupply situation being exasperated by additional Iranian barrels – should nuclear talks with the Islamic Republic end on a positive note – continued to weigh on trading sentiment on Tuesday.

At 12:06 BST, the Brent front month futures contract for August delivery was down 0.25% or 16 cents at $63.79 a barrel while WTI’s July contract was broadly flat at $59.77 having traded above $60 for much of last week.

Speaking to Sharecast at World National Oil Companies (NOC) Congress in London, Chris Cook, former director of the International Petroleum Exchange and a research fellow at UCL, said: “Iran remains the riddle. If Tehran tries to flood the market should the sanctions be lifted, it would be self defeating because you would wonder that would do to the oil price.”

Anecdotal evidence about India and China importing oil despite lacklustre demand was providing some support to the price.

“There is a thinking out there in the market that China [and to an extent India] are stocking up on oil reserves, rather than dollar reserves. This is the most opportune time to do so from their perspective,” Cook added.

“Furthermore, I think OPEC is on life support, and the world needs a better more reflective global proxy benchmark than Brent, in a what is now very changed market undergoing a once-in-70-year change.”

Eight out of ten delegates at the NOC Congress polled by Sharecast opined that should Iran add anything in excess of 200,000 barrels per day of oil, on the market, the effect would be substantially price negative.

Andy Brogan, global oil and gas transactions leader at EY, said: “The industry would have to contend with volatility for a while. There appears to be little confidence in a medium term bounce in the price of oil.”

“The industry is in the midst of a profound change. International Oil Companies [IOCs] have recently gone through a very rigorous review of their portfolio. This will have implications for their partnerships [with NOCs and fellow IOCs] going forward.”

Away from the oil market, gold appears to be stabilising, albeit at a lower level. COMEX gold for August delivery was down 0.21% or $2.50 at $1,183.30, with spot markets reflecting the mood remaining broadly flat at $1,183.95. COMEX silver was down 10 cents or 0.64% or $15.98 an ounce, while spot platinum was also broadly flat at $1086.70 down 0.06%.

Base metals continued to trade sharply lower on the London Metals Exchange with three-month contracts of lead (15.5%) and tin (down 36.8%) taking a hammering over tepid Chinese demand. Zinc (broadly flat), aluminium (down 5.9%), copper (down 2.97%) and nickel (0.97%) were also in the red.

On the agricultural commodities front, CBOT corn (up 0.71%), wheat (up 0.50%), ICE cocoa (0.41%) and CME live cattle (up 0.22%) were all in the green. However, ICE cotton contract was trading lower by 0.20% or 13 cents at $63.50 per pound.