Commodities: Oil futures up as WTI premium holds firm

The oil market registered further price increases on Thursday with WTI futures extending overnight gains well into the pre-Christmas trading session.

At 1003 GMT, the Brent front-month futures contract was up 0.24% or nine cents at $37.45 per barrel, while WTI was up 0.56% or 21 cents at $37.71 per barrel, as the spread between both futures contracts was initially wiped out overnight and subsequently turned into a premium in favour of the US benchmark.

Support to the upside lasted well into Wednesday, as well as early trading in Asia with the US Energy Information Administration reporting that the country’s crude oil inventories fell by 5.9m barrels in the past week, compared with analysts' expectations for an increase of 1.1-1.3m barrels.

Crude stocks at the US delivery hub of Cushing, Oklahoma rose by 2m barrels, the EIA added. Prior to the EIA data release, oil producers’ cartel OPEC claimed the oil price would recover to $70 per barrel by 2020.

Elsewhere, selected base metals saw positive trading on the London Metal Exchange overnight. Copper (up 0.3%), primary aluminium (up 1.8%), tin (up 0.7%), zinc (up 1.7%) and lead (up 0.8%) three-month delivery futures contracts closed on a positive note on Wednesday. At 1003 GMT during the current session, COMEX copper was marginally down 0.16% or 35 cents at $212.10 per pound.

Precious metals also registered modest pre-Christmas gains. COMEX gold futures contract for February delivery was up 0.44% or $4.70 at $1073.00 an ounce, while spot gold in Dubai was up 0.27% or $2.93 at $1073.43 an ounce. Elsewhere, COMEX silver was up 0.34% or five cents to $14.34 an ounce, while spot platinum was up 0.77% or $6.65 at $875.35 an ounce.

In their year-end assessment, analysts at Deutsche Bank, said: “Despite commodities continuing to underperform other asset classes such as equities and bonds, price weakness has continued and most commodities are now trading below long-term real average prices. This has prompted many investors to question whether commodities remain a valid asset class.”

“Our response is that 'we may be in the sin bin, but we are not out of the game'. We think it is too early to call the bottom, but supply cuts are gaining momentum, especially in oil, and we believe the end is in sight for the vicious commodity – forex downward spiral. We think 2016 will bring a flurry of corporate activity including bankruptcies, raising of equity capital, asset sales and M&A, all signs that the commodity cycle is getting closer to finding a floor."

Finally, headline agricultural commodity futures were on a mixed patch in early trading calls. CBOT corn (down 0.07%) and ICE cocoa (down 0.09%) futures were marginally down, while CBOT wheat (up 0.32%) and ICE cotton (up 0.24%) futures headed higher.