Commodities: Oil market endures another volatile session

Oil markets witnessed another volatile session on Wednesday, with Brent and WTI futures alternating between positive and negative forays, while staying at 12-year lows as oversupply concerns and lacklustre demand continue to dominate market chatter.

At 1718 GMT, the Brent front-month futures contract for February delivery was down 1.36% or 42 cents at $30.44 per barrel, while the WTI was up 0.13% or four cents at $30.48 barrel.

Analysts at RBC Capital Markets, said, “The confluence of macroeconomic worries, negative news flow, and poor data points, has resulted in incredibly poor sentiment towards crude. Lacking bullish drivers, the start to this year looks sloppier than we originally anticipated and we now expect WTI to average $40 per barrel this year and $57 per barrel in 2017.”

Responding to the ongoing market volatility, the US Department of Energy's statistical arm – Energy Information Administration – said in its Short-Term Energy Outlook that crude oil inventories would continue to rise in 2016 by 700,000 barrels per day, following an increase of 1.9m bpd in 2015.

Meanwhile, a survey by Dubai-based Gulf Intelligence found 51% of 250 senior energy industry professionals operating in the UAE who responded to its poll felt that oil prices would average $40 barrel in 2016, while nearly a third predicted a $30 per barrel-level.

Away from the oil markets, base metal futures saw a recovery on the London Metal Exchange on positive sentiment from China. Three-month delivery contracts of nickel (up 0.2%), zinc (up 1.3%), primary aluminium (up 0.6%) and lead (up 0.6%) posted nominal upticks in late afternoon trading. However, copper (down 0.1%) and tin (down 1.5%) futures extended the previous session’s losses.

Steve Hardcastle, head of client liaison at Sucden Financial, said, “Chinese December copper import figures of 530,000 tonnes were positive, well up on November, prompting a $40 hike in the price to a high of $ 4,410, although the positivity was tempered by a strengthening yuan. The broader rallies do appear to be fragile but any change in sentiment is welcome.”

Precious metals also limped back into recovery mode. COMEX gold futures contract for February delivery rose 0.51% or $5.50 to $1,090.70 an ounce, while spot gold in Dubai was 0.45% or $4.84 higher at $1,091.40 an ounce. Spot platinum rose 2.15% or $18.00 to $854.38 an ounce, while COMEX silver jumped up to $14.18 an ounce, up 3.12% or 43 cents.

Finally, agricultural commodity futures were in positive territory over early trading calls stateside. Headline futures contracts including CBOT corn (up 0.70%), wheat (up 0.52%), ICE cotton (up 1.14%), cocoa (up 1.05%) and CME live cattle (up 0.55%) traded higher.