Commodities: Oil lower on Saudi output, precious metals maintain levels

Oil markets were trading lower in Asia on Monday, with oversupply concerns dominating market chatter.

At 0726 BST, the Brent front month futures contract for July delivery was down 20 cents or 0.30% at $63.68 a barrel while the WTI was lower by 21 cents or 0.33% at $59.76. Bearish trends noticed towards the end of last week showed no signs of dissipating on news that Saudi Arabia could increase its output in an already oversupplied market.

The country’s production data for May confirmed the OPEC heavyweight was pumping well above 10m barrels per day (bpd) at 10.31m bpd. Additionally, an official from the state oil firm Saudi Aramco told Indian media that the country stood ready to meet any potential rise in demand over the second half of the year. India is one of the leading importers of Saudi crude.

The US Energy Information Administration (EIA) has forecast that Brent could average around $61 per barrel in 2015, and $67 per barrel in 2016 while the WTI could trade around $56 per barrel in 2015 and $62 per barrel in 2016. The said level is deemed comfortable enough to keep many US shale oil plays, especially Eagle Ford exploration and production, viable.

IG market analyst Josh Mahony said, “With US driving season and Saudi Arabian air conditioning units set to run 24/7, demand for energy will likely pick up over the summer.

“However, with each spike in prices comes a new bout of producers whose operations become economically viable, leading to increased supply. For this reason, prices between $60-70 are likely to dominate for some time yet.”

Precious metals were broadly flat in Asia, with COMEX gold for August delivery up 20 cents or 0.02% at $1,179 an ounce, while COMEX silver for July delivery was up a mere 4 cents or 0.12% at $15.86 an ounce.

Elsewhere, spot platinum was marginally down 0.07% or 74 cents at $1094.34 an ounce, as the market began the week on a cautious note with a less than certain outlook on the timing of a possible US interest rate rise and equities picture remaining mixed.

Meanwhile, base metals continue to trade lower, with COMEX copper for September delivery down 1.04%. On Friday, zinc (down 2.8%) and lead (down 2.4%) hit their lowest levels on the London Metals Exchange in over two months, after news of inflows of inventories into warehouses and increasing oversupply concerns.

On the agricultural commodities front, CBOT corn (down 0.42%), wheat (down 0.98%) and CME live cattle (down 1.39%) were all trading lower, while ICE cocoa (up 1.32%) and cotton (up 0.29%) were seen recovering from recent lows.