Commodities: Oil futures head higher for second successive session

Oil futures headed higher for a second session in a row on Friday, with a torrid week ending on a positive note in Europe.

Overnight, US commercial crude oil inventories increased by 4m barrels during the week ending 15 January, according to the Energy Information Administration, the statistical arm of the country's Department of Energy.

Despite the increase, traders were encouraged that stockpiles at the oil delivery hub of Cushing, Oklahoma, rose by only 191,000 barrels; a figure below levels many market commentators had feared.

Gasoline stockpiles jumped by another 4.6m barrels, although those of other products such as distillates slipped by 1m barrels. Imports of oil fell by 409,000 barrels a day in the latest week, the EIA added. Hopes of further stimulus measures in Europe, China and Japan also strengthened oil prices.

At 1722 GMT, the Brent front-month contract was up 6.74% or $1.97 to $31.22 per barrel, while WTI rose 6.64% or $1.96 to $31.49 per barrel.

Ahead of the latest intraday uptick, Moody’s lowered its 2016 price estimate for both Brent and WTI crude to $33 per barrel. For Brent, this marks a $10 per barrel reduction from the rating agency's previous estimate, and for WTI, a $7 per barrel reduction.

Moody's expects that both prices will rise by $5 barrel on average in 2017 and 2018.

Terry Marshall, Senior Vice President at the ratings agency, said, “OPEC countries continue high levels of production in the battle for market share, contributing to the current oil glut despite moderate consumption growth by key consumers such as China, India and the US. In addition, we expect the rise in Iranian oil output this year to offset or exceed production cuts in the US."

Elsewhere, base metals headed higher on the London Metal Exchange. At 1635 GMT, three-month delivery futures contracts of primary aluminium (up 1.8%), copper (up 1.4%), lead (up 1.5%), nickel (up 1.2%) and zinc (up 2.0%) headed higher. However, tin futures (broadly flat), benefitting from production cutbacks in China earlier in the week, remained lacklustre.

Analysts at Macquarie Research opined base metals will face major challenges in 2016 with their survey pointing to a further deterioration in the Chinese copper market, even though seasonality is coming into play.

“Looking forward, sentiment on the copper market remains weak across the industry chain, especially from buyers, as they expect demand to continue its seasonal slowing into next month. We begin to see some supply response from medium- and small-sized smelters, but the larger ones are sustaining high utilisation rates,” Macquarie analysts added.

Meanwhile, precious metals climbed back to Wednesday’s highs. On the COMEX, the front-month gold futures contract posted an uptick of 0.26% or $2.90 to $1,101.10 an ounce. However, spot gold was down 0.15% or $1.65 at $1,099.55 an ounce.

COMEX silver rose 1.43% or 20 cents to $14.30 an ounce, while spot platinum rose 1.95% or $15.98 to $834.43 an ounce.

Finally, agricultural commodity futures remained in positive territory. CBOT corn (up 0.54%), wheat (up 0.53%), ICE cocoa (up 0.60%), cotton (up 0.89%) and CME live cattle (down 1.28%) headed higher in early trading calls stateside.