Commodities: Brent remains volatile as base metals take another tumble

Oil and base metal futures remained volatile on Monday, while gold markets saw lacklustre trading in Europe ahead of the US Federal Reserve’s decision on interest rates.

At 1532 BST, the Brent front month futures contract was down 0.74% or 37 cents to $49.38 per barrel. However, WTI futures, up 0.11% or five cents to $47.20, narrowed the spread to Brent and extended an uptick overnight.

Steven Brann, senior investment manger at Vitol, said there are several unknowns in the oil market at the moment making it harder to predict the direction of the crude price.

Speaking at Gulf Intelligence Energy Markets Forum in Fujairah, UAE, Brann said, “We have China’s economy in transition; the riddle of Iraqi production, possibility of additional Iranian barrels coming on to the market (and perhaps already here), US shale proving more resilient, and how OPEC would respond over the coming months in an era of lower oil prices.”

At the same venue Christof Ruhl, head of research at Abu Dhabi Investment Authority (ADIA), said: “As oil prices started declining in the face of incremental supplies, it was only rational for OPEC not to cut production in order to maintain market share. However, shale has shown tremendous resilience, and neither US nor Canadian production has suffered to the extent market forecasters thought it would.”

OPEC's response from hereon would have a huge bearing on the direction of the market, he added.

Meanwhile, base metal futures returned back to negative territory on the London Metal Exchange with major contracts trading lower. Past the midway point of the LME session, three-month delivery contracts of primary aluminium (down 0.1%), lead (down 0.9%), nickel (down 2.6%), tin (down 1.4%) and zinc (down 2.0%%) slipped downwards.

However, copper (up 0.3%) bucked the trend on positive conjecture over China. Analysts at Macquarie said other Asian emerging markets were a bigger concern for the commodities sphere. "China’s $3.6trn of foreign exchange reserves, in our opinion, leaves them in control for the foreseeable future” should stimulus be required, they said in a note to clients.

Meanwhile, gold markets saw modest losses as investors’ focus remained on the US Federal Reserve. COMEX gold for December delivery was down 0.17% or $1.90 to $1,117.10 an ounce, while spot gold was down 0.14% or $1.55 at $1,117.97 an ounce.

Concurrently, COMEX silver was up 0.44% or seven cents at $14.95 an ounce, while spot platinum's recovery did not last a session, as it fell 0.66% or $6.39 to $967.26 an ounce following overnight gains.

Finally, major agricultural commodities futures were also in negative territory. CBOT corn (down 1.30%), wheat (down 1.23%), ICE cotton (down 0.30%) and CME live cattle (down 0.14%) futures traded lower.