Commodities: Oil futures end European session on higher ground

Oil futures rounded off the week on positive turf, with Brent and WTI futures posting gains for much of the European session on Friday.

Focus shifted back to market fundamentals, after the International Energy Agency noted that US oil production fell last week by about 25,000 barrels per day to just over 9m bpd, down from a peak of 9.6m bpd in April, soothing concerns about a supply glut.

Furthermore, Saudi-Russian attempts at freezing production in February, and Saudi Arabia’s subsequent comments that it would work with other producers to limit oil market volatility also boosted confidence.

At 1720 GMT, the Brent front month futures contract was up 4.02% or $1.49 to $38.56 per barrel, while the WTI rose 3.47% or $1.20 to $35.77 per barrel.

Analysts at Barclays remain bearish over the short-term, but bullish for the second half of the year. “Stockbuilds will continue in 2016” but less so towards year-end, they added.

“Data for February from Russia was indeed flat at 10.38m barrels per day, but this level is almost a thirty year high. We can expect a final decision on an oil producers’ freeze in March, which if not forthcoming will likely have a negative impact on the oil price,” said analysts at FinnCapp.

Away from oil markets, precious metals stayed on positive turf. The COMEX front-month gold futures contract was up 0.84% or $10.60 at $1,268.80 an ounce, while spot gold was up 0.49% or $6.23 to $1,270.48 an ounce.

COMEX silver rose 3.59% or 54 cents to $15.69 an ounce, while spot platinum also rose 3.80% or $36.08 to $985.13 an ounce.

Headline base metal futures were largely higher across the London Metal Exchange board. At 1635 GMT, three-month futures contracts of nickel (+3.6%), lead (+1.2%), tin (+3.4%), zinc (+0.5%) and copper (+2.6%) headed upwards, with the latter capping the psychological $5,000/t level. However, primary aluminium (-0.6%) futures headed lower for a second successive session.

Liz Grant, senior account executive at Sucden Financial, said, "The US non-farm payroll data which, when released, showed an increase of 242k which was better than forecast. The underlying unemployment rate was unchanged at 4.9%.

“The initial market reactions saw the dollar and stocks rally and base and precious metals retreat. As the London afternoon session continued, the dollar weakened. This triggered a turnaround for metals which made fresh daily highs across the board as shorts rushed for cover. Copper breached $5,000 and up to $5,059 as stops were triggered.”

Finally, agricultural commodity futures were on largely positive territory. CBOT corn (+0.03%), ICE cocoa (+1.22%), cotton (+0.34%) and CME live cattle (+0.37%) contracts headed higher. However, CBOT wheat (down 0.60%) slipped in early trading calls stateside.