Commodities: Oil, gold up but base metals head lower yet again

Oil benchmarks recovered from overnight losses on Thursday, while gold spiked and base metal futures remained in negative territory over the European session.

At 1546 BST, the Brent front month futures contract for October delivery was up 0.67% or 32 cents at $48.07 per barrel. Concurrently, the WTI was up 0.72% or 32 cents to $44.80 per barrel, reversing most of the losses it incurred over the previous session.

Precious metals remained in positive territory as COMEX gold for December delivery rose 1.94% or $22.00 to $1,153.50 an ounce, while spot gold rose 2.19% or $24.74 at $1,155.04 an ounce. COMEX silver was up 2.34% or 35 cents to $15.14 an ounce, and spot platinum finally got some respite rising 2.40% or $22.36 to $954.15 an ounce.

Meanwhile, selected base metal futures fell further on the London Metal Exchange extending Wednesday’s declines. Past the midway point of trading, LME’s three-month delivery contracts of primary aluminium (down 0.6%), copper (down 1.4%), lead (down 1.1%) and nickel (down 1.0%) were trading lower.

Only tin (up 1.9%) and zinc (up 0.2%) bucked wider base metal market trends as ratings agency Moody’s said European metal and mining companies are most exposed to China’s gradual slowdown, and could suffer both in terms of export volumes and the knock-on effect of lower prices.

Moody’s estimates that about 20%-30% of EMEA mining output, in terms of revenues, is exported to China both directly and indirectly, which is the highest of all sectors. The oil and gas sector has indirect exposure via the impact of weaker demand on prices, while the shipping industry will feel the side effects of lower demand for imports of raw materials and lower exports, the agency added.

Analysts at Macquarie said the biggest question in commodity markets at the present time is around how much downside risk is yet to be built into demand expectations for 2016–17.

“For the first time since 2013, we feel slightly more comfortable that Chinese demand may have hit a cyclical low, as monetary easing is increasingly backed by more accommodative fiscal policy. However, ex-China emerging markets are becoming a bigger concern for future demand, following the currency moves and capital flight seen. As such, further downside risk to global demand remains,” they said in a note to clients.

Finally, agricultural commodities futures were firmly in negative territory. CBOT corn (down 0.26%), wheat (down 0.39%), ICE cotton (down 0.87%), ICE cocoa (down 0.05%) and CME live cattle (down 1.03%) futures were seen heading lower.