Commodities: Metals slide on profit taking, oil continues lower

Metal futures shed gains on Friday with oil benchmarks also heading lower for a third successive session as the weekend approached.

At 1635 GMT, three-month delivery contracts of primary aluminium (down 1.7%), nickel (down 3.6%), zinc (down 3.4%), and lead (down 1.7%) shed gains on the London Metal Exchange. The copper contract continued to trade at historic lows late in the session, registering a 1.1% decline to $4,578.00 per metric tonne.

The previous session’s rally, in wake of Chinese regulators considering a request from the China Nonferrous Metals Industry Association to investigate short-selling in domestic metal contracts, well and truly subsided with only tin (up 1.6%) bucking the profit taking clawback .

Liz Grant, senior account executive at Sucden Financial, said, “Belief that the Federal Reserve will raise US rates in December bolstered the greenback which weighed on industrial commodities. LME specific, reports were numerous from China concerning producer cutbacks in nickel. On the spreads, short covering of December positions in copper saw the three-month contract tighten.”

Precious metals also registered declines with COMEX gold futures down 1.20% or $12.80 to $1,056.90 an ounce, while spot gold was 1.42% or $15.20 lower to $1,057.13 an ounce. COMEX silver was down 0.81% or 11 cents to $14.06 an ounce, while spot platinum was down 2.01% or $17.13 to $835.40 an ounce.

Oversupply concerns dominated oil market sentiment as OPEC ministers prepare to meet at the cartel’s secretariat in Vienna, Austria on 4 December, to discuss their headline oil production quota currently above 31 million barrels per day (bpd), with many of its members frequently breaching production caps.

Earlier, the US Energy Information Administration reported that crude oil inventories rose by 1m barrels to 488.2m for the week ending November 20, 2015.

At 1711 GMT, the Brent front-month futures contract was down 1.21% or 55 cents to $44.91 per barrel. Meanwhile, WTI was 2.44% or $1.05 lower at $41.99 per barrel, as both benchmarks shed gains made earlier in the week following geopolitical tension in the Middle East. Anecdotal evidence suggests much of the market is already pricing in a no-change scenario at OPEC.

“Oil has dragged the rest of the commodity complex lower with it. The uncertainty in China following another weekly rise in US inventories has led to a decisive fall in Brent crude oil back below $45 per dollar,” Jasper Lawler, analyst at CMC Markets.

Finally, agricultural commodity futures remained on a mixed patch over a post-Thanksgiving half day of trading stateside. CBOT wheat (down 1.69%) and corn (down 0.54%) traded lower. ICE cocoa (up 0.12%), cotton (up 0.96%) and CME live cattle (up 0.28%) futures traded higher.