Commodities: Brent oil futures contract plummets to 11-year low

Oil futures took a pounding on Monday in the face of a stronger dollar and entrenched oversupply sentiment.

At 1718 GMT, the Brent front-month futures contract was down 2.01% or 74 cents to $36.14 per barrel, having retreated to $36.06 at one point – its lowest level since July 2004 – before mounting a tepid recovery over the European session.

Concurrently, WTI was also down 1.04% or 36 cents to $34.37 per barrel having fallen to $34.17; its lowest level since 2009.

Jasper Lawler, market analyst at CMC Markets said, “The oil price slide continues on expectations that supply will continue to outstrip demand as producers cut costs while ramping up production to take market share. The US added the most oil rigs since the summer last week whilst OPEC is seen producing more than 31.5m barrels per day.”

However, Andrew Kenningham, senior global economist at Capital Economics, noted: “Brent has dropped below $40 per barrel recently but we doubt it will fall much further for any length of time. Instead, we think cuts in non-OPEC supply, including US shale oil, and reasonably strong global demand will lead to a gradual recovery in prices. Meanwhile, industrial metals prices should be boosted by a rebound in demand from China.”

Base metals recovered across the board with selected futures contracts extending the previous session’s gains. The three-month copper delivery futures contract was up 1.3% to $4,736.00 per metric tonne in late afternoon trading on the London Metal Exchange. Additionally, primary aluminium (up 1.2%), nickel (up 1.5%), lead (up 2.7%) and zinc (up 1.3%) futures were also in positive territory. However, tin (down 0.5%) headed lower.

Liz Grant, senior account executive at Sucden Financial, said, “LME prices pushed higher albeit in thin conditions. Copper moved up through $4,700 to $4,730 following reports that China’s top nine producers are considering cuts of around 350,000 metric tonne if the market remains challenging.”

“As the day progressed, the dollar eased back giving additional support to LME prices which made fresh highs on the day. Turnover was low across the board and trading conditions were fairly quiet.”

Precious metals continued higher with the COMEX gold futures contract posting an uptick of 1.30% or $13.80 to $1,078.80 an ounce, while spot gold was 1.41% or $15.04 higher at $1,081.29 an ounce. Away from gold, COMEX silver rose 1.27% or 18 cents to $14.28 an ounce, while spot platinum rose 2.24% or $19.21 at $878.51 an ounce.

Finally, agricultural commodity futures slid lower in early trading stateside. CBOT corn (down 1.07%), wheat (down 1.59%), ICE cotton (down 0.43%) and cocoa (down 0.19%) futures headed lower.