Commodities: Oil futures continue to struggle as Brent-WTI spread narrows

Oil futures continued to struggle on Wednesday as persistent oversupply meant bearish sentiment remained embedded in the market, while the Brent and WTI spread narrowed in intraday calls.

At 1645 GMT, the Brent front-month futures contract was down 3.25% or $1.25 to $37.20 per barrel, while WTI was down 4.34% or $1.62 at $35.73 per barrel, as a relatively stronger dollar piled further pressure on both benchmarks.

Furthermore, the Brent-WTI spread fell below a dollar earlier in the session with both contracts lurking either side of $37-level, before the WTI retreated sharply on US inventory data.

According to the Energy Information Administration, the US Department of Energy’s statistical arm, the country’s commercial oil inventories rose by 4.8m barrels over the five days ending on 11 December to reach 490.7m.

Jasper Lawler, analyst at CMC Markets, said, “The spread between Brent crude and WTI had tightened after the US congress moved towards an agreement to lift the ban on US oil exports which has been in place since 1973, but widened again as both contracts fell following inventory data pointing to the biggest build up in 22 years.”

“US oil exports are not likely to affect overall market prices but would mean US and global producers selling into the same markets. Global producers including Russia and OPEC countries might have to cut prices to compete with US shale producers should it happen.”

Elsewhere, selected base metals saw marginally positive trading on the London Metal Exchange. At 1635 GMT, the three-month copper delivery futures contract registered a 0.5% uptick to $4,592.50 per metric tonne, still within range of six-year lows.

Concurrently, primary aluminium (up 1.2%), nickel (up 1.0%) and tin (up 0.9%) contracts headed higher, but zinc (down 0.7%) and lead (down 2.3%) headed lower.

Liz Grant, senior account executive at Sucden Financial, said, "Ahead of the Fed decision, the dollar edged higher and markets were jumpy. Turnover on the LME was particularly thin and price ranges were narrow. Copper was once again trading either side of $4,600 while the large stock increase reported in lead, which coincides with third Wednesday settlements, drove the price back below $1,700."

However, the precious metals market posted an uptick on the expectation of a dovish tone from the US Federal Reserve. COMEX gold futures rose 1.26% or $13.40 to $1,075.00 an ounce, while spot gold was 1.29% or $13.68 higher at $1,074.90 an ounce. COMEX silver futures rallied 2.87% or 40 cents higher to $14.17 an ounce, while spot platinum rose 2.23% or $19.08 to $874.48 an ounce.

Finally, headline agricultural commodity futures were on a negative patch in early trading stateside. CBOT corn (down 1.66%), wheat (down 1.72%), ICE cocoa (down 1.35%), cotton (down 0.19%) and CME live cattle (down 0.72%) futures were all trading lower.