Commodities: Oil drops further but gold holds gains

The oil market registered further declines on Tuesday as oversupply concerns trumped geopolitical tension in the Middle East, but gold futures held on to overnight gains in the European session.

At 1828 GMT, the Brent front-month oil futures contract was down 1.91% or 71 cents to $36.51 per barrel, while the WTI was down 2.20% or 81 cents at $35.95 per barrel, with a scheduled data release from the US Energy Information Administration noting overnight that crude inventories at Cushing, Oklahoma - the delivery hub for WTI futures - rose to a record high of 63m barrels in the week ended 25 December.

Furthermore, US oil production climbed for a third week to 9.2m barrels per day bringing traders’ concerns about the persistent supply glut to the foreground after geopolitical tension between Saudi Arabia and Iran dominated discourse for much of the previous session.

However, precious metals led by gold held on to overnight gains on continued safe haven demand. COMEX gold futures contract for February delivery was up 0.31% or $3.30 at $1078.50 an ounce, while spot gold in Dubai was up 0.38% or $4.12 at $1078.73 an ounce.

Concurrently, COMEX silver was up 0.94% or 13 cents to $13.97 an ounce, while spot platinum was up 0.56% or $4.95 at $888.50 an ounce.

Elsewhere, selected base metals saw marginally positive trading on the London Metal Exchange overnight. Copper (up 0.8%) and nickel (up 0.5%) three-month delivery futures contracts headed higher at 1635 GMT, prior to the close.

However, primary aluminium (down 0.1%), lead (down 2.3%), tin (down 1.6%) and zinc (down 0.3%) contracts registered declines for much of the European afternoon session.

Liz Grant, senior account executive at Sucden Financial, said, “LME metals recovered during the London morning session but it was a slow grind to higher levels which eventually lost momentum as the dollar strengthened. Turnover was low across the board. Business in general was quiet and routine with “mixed” results.”

Finally, headline agricultural commodity futures were on a positive patch in early trading calls. CBOT corn (up 0.57%), wheat (up 1.15%), ICE cotton (up 0.05%) and CME live cattle (up 0.07%) futures were all heading higher.