Commodities: Oil slides post OPEC, gold stems decline after falling to 11-month low

Oil benchmarks continued to trade lower on Monday following OPEC’s decision to hold its daily production quota at 30m barrels per day (bpd) last week. The cartel, which is already said to be pumping in excess of 31m bpd, also said the “quota” was actually more of a “recommendation” to its 12 oil producing member nations.

The market saw it as yet another indication that OPEC would not relent in its bid to protect its market share. Secretary General Abdalla Salem el-Badri said: “We do not have a so-called oil price target, we will leave that to the market.”

At 0755 BST, the Brent front month futures contract for July delivery was trading down 0.90% or 58 cents to $62.77 a barrel, well below the $65 level it was resisting before OPEC kicked off deliberations in Vienna on Wednesday. Additionally, the WTI was down 26 cents or 0.27% at $58.97.

Kevin Norrish, analyst at Barclays, said: “In keeping its production targets on hold, OPEC signalled that it continues to stand by its November 2014 decision to let market forces determine prices.

“In contrast to the previous meeting, when more discord existed between the hawks [Iran and Venezuela, for example] and other GCC OPEC members [Saudi Arabia, Qatar, Kuwait and UAE], this time both camps supported the decision. This reaffirms our view that, for now, the group will wait for lower prices to curb non-OPEC supply growth to stimulate global demand.”

Precious metals market remained bearish with gold hitting an 11-week low stateside on Friday, as the dollar rose on positive US employment data. However, Asian trading on Monday began on a calmer note, with COMEX gold for August delivery trading up 0.35% or $4.10 at $1,172.20 an ounce, with COMEX silver for July delivery also trading up 0.48% or 8 cents at $16.06 an ounce.

Picture in the base metals market remained mixed with contrasting fortunes for various metals as China continues to send mixed signals about a possible stimulus measures in wake of its less than convincing economic performance of late. The country is like to grow at 7%, with India having overtaken it in terms of headline growth at 7.5%.

On the London Metal Exchange, nickel, up 0.9% or $112.50 to $13,025 a tonne, was one of the few bright spots. Aluminium (broadly flat), tin (down 0.7%), lead (down 0.8%) and zinc (down 0.3%) pointed to a downbeat precious metals scenario.

Finally, on the agricultural commodities front, CBOT corn (up 0.42%), wheat (up 0.77%) were in the green, while CME live cattle (down 0.58%), ICE cotton (down 0.11%) and cocoa (down 0.10%) were all trading lower.