Commodities: Base metals see mixed European session, oil marginally up

Industrial metal trading for the week commenced on mixed note on Monday, following lacklustre data from China, with selected contracts trading lower, as oil benchmarks limped gradually upwards.

China’s imports fell 8.1% year-on-year in July as expected, but exports also declined 8.3% pointing to weakness in industrial production. Nonetheless, expectation of an economic stimulus by Beijing boosted the country’s equity market and supported selected metals futures contract in European trading.

Past the midway point in trading on the London Metal Exchange, three-month futures contracts of copper (up 0.4%), nickel (up 1.6%) and zinc (up 0.4%) were all trading higher. However, primary aluminium (down 0.4%), lead (down 0.5%) and tin (down 1.0%) were in the red.

Meanwhile, precious metals saw a much better session with platinum finally reversing negative trends on the back of miners, such as Lonmin, announcing production cuts in a market grappling with oversupply. At 1608 BST, spot platinum rose 2.24% or $21.53 to $984.78 an ounce; though still well short of $1,000-level long callers seek.

Gold got a boost after a US Federal Reserve official suggested a September rate hike may not be on the cards as many expect. Fed vice chairman Stanley Fischer told Bloomberg he doesn’t expect the first rate hike in nine years to occur until inflation returns to the central bank’s 2% target.

COMEX gold futures contract for December delivery was trading up 0.69% or $7.60 to $1,101.70 an ounce, while spot gold was up 0.89% or $9.73 to $1,103.88 an ounce. Concurrently, COMEX silver for September delivery was also up 1.51% or 22 cents to $15.05 an ounce, as talks over Greece's €86bn bailout continued with an end seemingly within reach.

Connor Campbell, financial analyst at SpreadEX, said reports of an impending, and successful, end to the bailout negotiations appear to have helped European indices maintain their mild growth as the day went on.

“However, things aren’t all sewn up just yet, with German government spokesperson Steffen Seibert suggesting that Merkel and co. might not be the biggest fans of the pace of the deal’s progress, favouring thoroughness over haste.”

Meanwhile, oil benchmarks began in the red in Asia, but European buying sent both Brent and WTI on a gradual hike upwards from six-month lows seen last week. The Brent front month futures contract was just shy of the $50 per barrel level at $49.85, up $1.24 or 2.55%, while the WTI was up 2.10% or 92 cents at $44.79, as traders absorbed the potential of a Chinese stimulus and moved to cover their losses.

Analysts at Barclays said a production decline over the third quarter was very likely. “Many UK exploration and production companies met or exceeded production forecasts in over the second quarter of 2015, and some even expect continued growth in the second half 2015 despite lower prices over the near term.”

Yet the analysts forecast production to decline over the third quarter before rebounding slightly in the fourth quarter. Last month, the International Energy Agency echoed a similar sentiment opining that all things staying where they are, the supply-demand imbalance will not last, adding that “something has to give.”

Finally, agricultural commodities futures rallied as CBOT corn (up 3.52%), wheat (up 2.01%), ICE cotton (up 0.53%) and CME live cattle (up 0.47%) were on the up. However, ICE cocoa bucked the trend, down 0.90% or $28 at $3079 per metric tonne.