Commodities: Brent fluctuates around $50/bbl, as base metals take another beating

Brent futures were seen resisting a decline below $50 a barrel on Thursday, during another volatile session for the oil markets, while metals futures, excepting tin, took another beating in European trading.

Having swung back and forth around the $50-level, the Brent front month futures contract was down 0.58% at $49.30 per barrel. However, the WTI’s slide of 1.46% to $44.59 was much deeper as the market continues to grapple with lacklustre Chinese demand and entrenched supply-demand imbalances.

Analysts at Goldman Sachs noted: “While oil supply and demand will likely find a balance between now and sometime in 2016 with an increasing likelihood of this being driven by operational stress, this doesn’t mean a sharp rebound in prices will occur quickly as so many other factors will likely weigh on prices.”

Macro forces will keep prices under pressure, they added.

Meanwhile, the precious metals market was calmer, as gold and silver stepped back a fraction into positive territory. COMEX gold for December delivery was up $3.00 or 0.28% at $1,088.60 an ounce, while spot gold was up $4.40 or 0.41% at $1,089.43 an ounce.

COMEX silver was up six cents or 0.39% at $14.61 an ounce, while spot platinum got some respite, trading up $1.18 or 0.12% at $950.98 an ounce. However, there was little relief for industrial metals with a slew of declines, excepting tin futures.

Past the midway point in trading on the London Metals Exchange, three-month delivery contracts of primary aluminium (down 1.4%), copper (down 0.1%), nickel (broadly flat), lead (down 0.9%) and zinc (down 0.4%) were all trading lower.

Only tin futures, up 1.7% or $252.50 at $15502.50 per metric tonne, defied the broader market trend.

Analysts at Macquarie said a feature of LME trading this year has been that throughout the overriding bearish trend, a number of metals have briefly overcome sentiment, lifting enough to begin triggering the ranks of short stops massing overhead, and driving sharp – though generally short-lived – rallies.

“On a couple of occasions, the rally has been preceded by some abrupt warrant cancellations and attendant squeezing on the front of the curve. The best recent example is tin – the humblest of the LME metals in terms of volumes, but the metal with the most impressive recent upside, rallying 21.8% in the month to 28 July.”

Yet, as with the others before it, a recent inevitable faltering in upward momentum deteriorated into a full-blown sell-off, with spreads collapsing and the flat price shedding 3% at one stage on Wednesday.

“The tin play looks to be concluded for now – but we note that certain near-dated spreads for copper, lead and zinc have been tightening of late, and stocks moves for the latter two have recently borne some of the hallmarks of some of this year’s earlier manoeuvres. Are lead and zinc limbering up for another short-term squeeze?,” Macquarie analysts remarked.

Finally, the agriculture futures were fairly mixed. CBOT corn futures contract was down 0.59%, while ICE cocoa (down 1.72%) and cotton (down 1.97%) saw sharp selloffs on supply concerns. However, CBOT wheat (up 1.89%) and CME live cattle (up 0.52%) contracts were riding high on anticipated demand from US supermarkets as the country’s Labor Day holiday weekend approaches.