Commodities: Burst of volatility grips crude oil futures

Oil futures witnessed unusually high volatility after initial reports of a "significant" announcement between Russia and Saudi Arabia on the sidelines of the G-20 gatherings in Hangzhou, China turned out to be significantly overstated, judging by markets´ initial reaction.

As the initial headlines broke across traders´ screens, crude oil futures jumped by over 5% but quickly came off their intra-session highs as investors parsed the details of the 'agreement'.

The two oil-producing giants said they would set up a working group to monitor the market and to draft recommendations to ensure its stability.

Russian Energy minister Alexander Novak later said the two nations had "a number of tools at our disposal for joint actions,” adding that both agreed that a freeze on current oil output levels would be the most constructive avenue.

Shortly afterwards however his Saudi peer Khalid Al-Falih said he saw little need at present to limit production.

Front month Brent crude futures finished the session up by 1.71% at $47.63 on the ICE, after hitting an intra-session high of $49.40 per barrel.

Industrial metals also found a bid, with Dalian iron ore futures advancing 0.7%.

Although it did not find its way into the headlines, the assembled G-20 leaders also endorsed creating a global body charged with monitoring steel overproduction.

Three-month tin futures on the LME were 0.8% higher to $19,262.50 by the end of trading, alongside smaller gains for similarly-dated zinc and nickel futures as of 1535 BST.

Of interest perhaps, on 2 September Macquarie noted the recent trends towards bursts of buy orders in LME nickel during Shanghai Futures Exchange trading hours. Three-month LME zinc hit a 15-month high on the day the Australian broker made that observation.

Silver futures put in a good showing on Monday, with the December 2016 COMEX contract rising by 1.29% to $19.627oz. as spot platinum tacked on 0.83% to $1,072.70/oz..

To take note of, the UBS commodity team hiked its near-term targets for iron ore, thermal coal and met-coal by between 5% to 10%.

"In our opinion, Chinese steel mills have bid up the iron ore price to defend market share. We expect the steel price in China to moderate over the next 3-6 months due to waning stimulus and seasonality, and as a result we expect iron ore prices to fall back to ~$50/t in Q4," analyst Myles Allsop said in a research note issed on 5 September.

Soft commodities were mixed, with milling wheat futures retreating 2.2% to €154.5 a tonne on Euronext LIFFE.

Robusta coffee advanced 0.6% to trade at $1,852.00 a tonne as of 1700 BST.

Futures on the Chicago Board of Trade didn´t trade on Monday on account of the Labour Day holiday.

Bloomberg´s commodity index advanced 1.08% to 82.99 while the US dollar index as the US dollar index drifted marginally lower, trading down by just 0.11% to 95.78 albeit after having plumbed an intraday low of 95.55.