Commodities: Oil futures recover from record lows, metals head lower

Oil futures registered further declines as Brent continued to lurk near seven-year lows on Monday, before a late afternoon uptick in European trading raised the price level.

Oversupply issues remain the dominant market concern following OPEC's decision to keep the taps on at its ministers' meeting in Vienna on 4 December. Brent breached the $38 per barrel level by a considerable margin before recovering back to $37.97, up 0.11% or four cents by 1647 GMT. Concurrently, the WTI was up 1.49% or 53 cents to $36.15 per barrel.

With OPEC and non-OPEC providers jostling for market position, around 3m bpd of surplus oil seems to be hitting the market. However, Iran’s deputy oil minister Amir Hossein Zamani Nia said there was “absolutely no chance” of his country delaying its oil shipments because of low prices or the supply glut.

Iranian oil exports are on course to hit a six-month high as Tehran ramps up production and buyers step in ahead of the removal of economic sanctions. Meanwhile, the International Energy Agency has cast doubt over the strength of oil demand in 2016, predicting last week that demand growth will slip back to 1.20m bpd next year.

OPEC left its own 2016 demand growth forecast unchanged at 1.25m bpd. The organisation also predicted supply from non-OPEC members was likely to fall faster in 2016 than previously estimated, having grown faster than forecast this year.

Analysts at Barclays said negative sentiment with regard to the current and expected state of oil market balances has intensified following OPEC’s meeting in Vienna. “Fundamentals, on the other hand, have not deteriorated markedly since the meeting. However, beyond the near-term weakness, an oil market balancing in 2016 is still on course to help prices rebound.”

Away from the oil market, most metal futures headed lower during late afternoon trading in Europe. At 1635 GMT, three-month delivery contracts of primary aluminium (down 0.5%), tin (down 0.1%) and zinc (down 0.4%) were in negative territory on the London Metal Exchange.

The copper contract remained under pressure trading at $4,681.00 per metric tonne down 0.7%. However, lead bucked the trend with a 0.2% uptick.

Steve Hardcastle, head of client liaison at Sucden Financial, said, "The metal markets are focusing on dollar weakness and putting in a steady performance as a result, although still nervous. Ranges have been tight and closes are within a few dollars of Friday’s closes as a result. Looking forward, the markets are likely to remain subdued until the result of the US Federal Reserve meeting is announced [on 16 December]."

The precious metal complex remained under pressure with traders pricing in a US interest rate hike. COMEX gold futures contract was down 0.63% or $6.80 to $1,068.90 an ounce, while spot gold was 0.60% or $6.46 lower at $1,068.31 an ounce. COMEX silver was down 1.11% or 15 cents to $13.73 an ounce; however spot platinum showed resistance with a rise of 1.20% or $10.11 to $850.41 an ounce.

Finally, agricultural commodity futures were on a mixed patch in early trading stateside. CBOT corn (up 0.93%), wheat (up 1.17%) and ICE cocoa (up 0.60%) futures were trading higher. Concurrently, ICE cotton (down 0.55%) and CME live cattle (down 0.24%) futures were in negative territory.