Commodities: Metals rally but oil futures see correction on profit taking

Oil futures headed lower as profit taking took hold on Friday, while metals recovered from previous lows in the absence of any major intraday data influencing the commodities market direction.

Brent and WTI - riding high after the US Energy Information Administration noted in its monthly forecast earlier in the week that the country's crude production will fall through mid-2016 - headed lower. The EIA also raised its 2016 world oil demand growth forecast to 100,000 barrels per day to 1.41 million bpd, with both benchmarks spending much of the week in positive territory, before Friday’s profit taking took hold.

At 1658 BST, the Brent front-month futures contract for November delivery was down 0.51% or 27 cents at $52.78 per barrel. The WTI was up 0.55% or 27 cents at $49.70 per barrel, trading at relatively lower levels compared to Wednesday.

Base metal futures also rose on the London Metal Exchange as three-month delivery contracts of primary aluminium (up 3.9%), copper (up 3.5%), tin (up 1.4%), lead (up 5.6%), nickel (up 4.1%) and zinc (up 10%) traded higher on supply correction sentiment as miners queued up to announce production cuts.

Analysts at Sucden Financial noted: “The main news overnight was Glencore’s announcement of zinc production cuts of approximately 500,000 metric tonnes from locations in South America, Australia and Kazakhstan. Zinc prices spiked higher, taking the rest of the LME complex with it in good volume turnover as shorts rushed for cover.

“In those metals where there is excess capacity and/or large stocks, prices may well head lower and this may trigger more supply responses, which could see some metals start to recover later in 2016.”

On the precious metals front, COMEX gold futures contract was up 1.29% or $14.80 at $1,159.10 an ounce, while spot gold was 1.71% or $19.43 higher at $1,158.44 an ounce. COMEX silver rose 0.63% or 10 cents to $15.87 an ounce, while spot platinum was up 3.17% or $30.12 at $978.71 an ounce.

Kelly-Ann Kearsey, dealing manager at GoldMoney, said the theme of price volatility in the precious metal market could continue. “The only significant data that we expect to see over the next seven days is the minutes of the Fed’s September meeting, and, once again, everyone is waiting for some hint about a US interest rate rise, which has effectively been the saga of the year.”

Finally, headline agricultural commodities futures saw mixed fortunes in early US trading. CBOT wheat (up 0.10%) and ICE cotton (up 0.36%) futures were trading marginally higher, while CME live cattle (down 0.89%), ICE cocoa (down 0.20%) and CBOT wheat (down 0.70%) contracts headed lower.