Commodities: Oil futures jump despite mixed messages from Iran

Oil futures headed higher on Wednesday, following a pledge by major producers to freeze production although Iran’s stance remains far from clear.

Responding to the Saudi-Russian initiative aimed at capping oil production at their respective January output levels, Iranian oil minister Bijan Zanganeh welcomed it, but did not commit to limiting his own country’s production level.

"We look forward to the beginning of co-operation between OPEC and non-OPEC countries and we support any measure that can stabilise the market and increase prices," he added.

The Saudi-Russian move, which is the first such instance of OPEC and non-OPEC cooperation on oil production for 15 years, is also backed by Venezuela and Qatar. Iraq’s oil ministry has come out in favour of the move as well, but is yet to formally clarify its own response.

Overnight, Saudi Arabian oil minister Ali al-Naimi said, “Freezing now at the January level is adequate for the market. We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.”

At 1725 GMT, the Brent front-month oil futures contract was up 7.36% or $2.37 to $34.55 per barrel, while WTI was up 6.44% or $1.87 to $30.91 per barrel.

Jasper Lawler, analyst at CMC Markets, said, “Oil reversed a sizeable chunk of the prior session’s losses after Iran issued its public support for the price freeze agreed between Russia and Saudi Arabia. Having rallied strongly while the meeting was held, oil prices added to gains despite uncertainty over whether Iran itself would participate in the freeze.”

Meanwhile, precious metals returned to positive turf, albeit marginally. The COMEX front-month gold futures contract was broadly flat at $1,207.90 an ounce, while spot gold was up 0.76% or $9.12 to $1,209.56 an ounce.

COMEX silver rose 0.04% or a cent to $15.34 an ounce, while spot platinum rose 1.81% or $16.85 to $947.30 an ounce.

Selected base metal futures were also in positive territory on the London Metal Exchange. At 1635 GMT, three-month futures contracts of tin (up 2.1%), nickel (up 0.5%) and copper (up 0.7%) rose, but lead (down 3.3%) and zinc (down 0.3%) futures posted declines.

Liz Grant, senior account executive at Sucden Financial, said, “The week continues to be relatively quiet on the LME and with low turnover once again. Tin traded higher as the floods in Bangka continue to hamper mine production and have led to a 30% reduction of February ore output according to Pt Timah.

“Spot gold found support again just below 1200 but the trading range was narrow as the market consolidates after the stellar rise seen last week.”

Finally, headline agricultural commodity futures were firmly in positive territory. CBOT corn (up 0.41%), wheat (up 0.69%), CME live cattle (up 1.57%), ICE cotton (up 0.25%) and cocoa (up 1.38%) traded higher in early calls stateside.