Commodities: Oil, base metals remain negative in Europe, gold recovers

Oil futures remained in negative territory on Monday, with Brent’s October contract beginning weekly proceedings below $50, while base metal futures also traded lower.

At 1348 BST, Brent was down 0.16% or eight cents at $49.11 a barrel. Concurrently, the WTI slipped 1.46% or 62 cents to $41.88 a barrel as market sentiment remained bearish with traders squaring last week's Chinese yuan devaluation against lacklustre demand and ample supplies.

Analysts at Barclays said the yuan devaluation was unlikely to materially impact Chinese commodities imports. “Furthermore, it is unlikely to have a direct impact on crude oil imports given the large scale with which crude has fallen and dwarves the depreciation of the yuan. If anything, this could possibly support China’s crude imports as the country is now increasingly becoming a refined product exporter,” they wrote in a note to clients.

Nonetheless, City commentators acknowledge the country’s gasoline demand growth is unlikely to accelerate above the 11% currently recorded.

“Chinese oil demand this year is weaker than headline numbers suggest, in our view, and product stocking and refined product exports are masking the strength in refinery runs. Gasoline and LPG were the strongest parts of the barrel in the first half of the year, and while some of this strength will be maintained, diesel and fuel oil are likely to be weighed down by macroeconomic pressure,” Barclays analysts concluded.

Base metal futures continued in negative territory, with the London Metal Exchange seeing a sea of red flashes as doubts lurked over China’s currency manoeuvres despite assurances by Beijing.

Past the midway point in trading, three-month delivery contracts of primary aluminium (down 1.0%), copper (down 1.1%), lead (down 1.3%), tin (down 0.5%) and zinc (down 0.9%) were all trading lower, with nickel being the only exception trading up 0.3%.

In real terms, the yuan has gained over 50% against all three of the other BRIC (i.e. Brazil, Russia, India and China) currencies in the last decade with its valuation looking increasingly unsustainable as the others have seen their currencies tumble, according Societe Generale analysts.

Elsewhere, precious metals were trading up with safe haven demand lending marginal support to prices. COMEX gold for December delivery was up 0.58% or $6.40 to $1,119.10 an ounce, while spot gold was up 0.55% or $6.08 to $1,121.15 an ounce.

COMEX silver was also up 0.57% or nine cents to $15.30 an ounce, while spot platinum was 0.16% or $1.63 higher at $993.88 an ounce.

Finally, on the agricultural commodities front, CBOT corn (up 0.73%), wheat (up 0.24%), ICE cocoa (up 0.42%) and ICE cotton (up 0.64%) futures were all trading up, while CME live cattle was down 0.68% or $1.02 at $146.85 per pound.