Commodities: Oil trades lower in Europe, base metals turn a corner

Oil benchmarks continued to slip in European trading on Wednesday, as confusion persisted over the eventual outcome of the Greek debt crisis talks, with a sovereign default being the most feared outcome.

Furthermore, as the Iranian nuclear talks continued in Vienna, the oil market remained bearish with supplies outstripping demand. At 1400 BST, the Brent front month futures contract for August delivery was trading down 0.83% or 53 cents at $63.06 per barrel while the WTI was down 1.36% or 81 cents at $58.66.

Following two successive sessions in the red, the base metals market recovered some ground.

Past the midway point in trading on the London Metal Exchange, three-month delivery contracts of primary aluminium (up 1.15%), copper (up 0.5%), lead (up 0.5%), nickel (up 1.9%) and zinc (up 1.65%) were in a much healthier session compared to Tuesday. Tin, which shed 3.5% overnight, recovered trading 2% or $272.50 higher at $14,225 per tonne.

However, trends suggest a wider recovery would remain elusive, with analysts at Macquarie expressing concerns about the direction of aluminium prices, forecasting “many years of pain” for the industrial metal.

In an email to clients, the analysts noted: “With Chinese aluminium exports now likely to play a sustained and growing role in the global market in future years, the whole market structure has been radically altered. In the near term, the all-in price needs to go to a level to cut sufficient capacity, and once more it looks like ex-China will have to take much of the burden.”

In the medium term, the price needs to remain at a level which keeps supply offline until inventories are suitably drawn down. “In our view that means prices at or below current levels in real terms for at least the next five years,” the analysts concluded.

Away from base metals, gold and silver futures led the precious market lower. COMEX gold for August delivery was down 0.32% or $3.80 at $1,168.00 an ounce, while COMEX silver was September delivery was 4 cents or 0.23% lower at $15.55 an ounce.

Spot gold was lower by 0.29% or $3.45 at $1,168.90 an ounce. However, spot platinum bucked wider market trend by trading up 0.41% or $4.37 at $1083.30 an ounce.

Finally, on the agricultural commodities front, CBOT corn (down 1.18%), wheat (down 2.88%) and ICE cotton (down 0.90%) were trading lower, while ICE cocoa (up 0.18%) and CME live cattle (down 0.52%) were in the green.