Commodities: Oil stabilises in Europe, base metals in limp recovery mode

Oil benchmarks staged a minor recovery in Europe on Thursday, after heavy declines overnight sent both Brent and WTI plummeting to levels last seen in April, as a US stockpiles report pointed to a rise crude oil inventories.

With the Iranian Nuclear talks extended beyond 30 June, raising the possibility of additional oil barrels from the Islamic Republic reaching an already oversupplied global market, the US Energy Information Administration said overnight that commercial crude inventories stateside rose by 2.4m barrels in the week ending 26 June, versus a 4.9m fall the week before.

It brought the total number of barrels in storage to 465.4m thereby placing US stockpiles firmly around levels last seen nearly 80 years ago. The overnight oil price slide Stateside was mirrored up to a point in Asia, before a marginal uptick in Europe.

At 1434 BST, the Brent front month futures contract was up 58 cents or 0.94% at $62.69 a barrel while the WTI was trading up 33 cents or 0.58%.

Joshua Mahony, market analyst at IG, commented: “Crude oil inventories rose for the first time in nine weeks, pushing oil prices lower. The fact is that US oil stocks remain incredibly high by historical levels and the resumption of the build-up we have seen throughout 2014 means that despite driving season being upon us, supply is higher than demand at this price.

“For this reason, losses seen across crude markets this week are likely to persist and the strong US supply means that there is essentially a cap upon oil prices rising by any degree in 2015.”

Elsewhere, base metals continued their limp recovery even though the broader market remained bearish on continuing concerns over Chinese imports, oversupply and the continuing Greek overhang. The immediate forecast remains dire, with analysts from Macquarie, SocGen and Bank of America ML maintaining medium-term bearish forecasts on a range of industrial metals.

In particular, Macquarie analysts see “years of pain for the aluminium market”, while BoAML analysts see 2016 copper prices in the region of $5,000 per tonne on Chinese economic weakness. On the London Metal Exchange, most three-month contracts were in the green past the midway point of the session, as short seller took a breather.

Primary aluminium (up 1.4%), copper (up 0.3%), lead (up 0.1%), tin (up 1.9%) and nickel (up 1.5%) were seeing regaining ground lost at the start of the week. However, zinc remained an exception to the norm, down 0.5% or $10.50 at $2035.50 per tonne.

Precious metals also saw mixed fortunes with COMEX gold for August delivery down $4.20 or 0.36% at $1,165.10 an ounce, while COMEX silver for September delivery was up 0.56% or nine cents at $15.67 an ounce. Spot gold came in 0.36% or $4.23 at $1,164.56 an ounce while spot platinum was only marginally better up 0.07% or 72 cents at $1,083.10 an ounce.

Finally, on the agricultural commodities market, CBOT wheat (down 1.10%), ICE cocoa (down 0.64%) and ICE cotton (down 0.6%) were all in the red, while CBOT corn (up 0.12%) and CME cattle (up 0.36%) were in the green.