Commodities: Oil, metal futures fail to escape recent levels

Oil and metal futures saw lacklustre trading on Tuesday, staying near recent levels hounded by oversupply issues, Japan’s entry into a recession and persistent concerns about China’s demand.

At 1642 GMT, the Brent front-month futures contract was down 1.23% or 55 cents at $44.01 per barrel, having risen as high as $44.35 in early trading before shedding the gains. Meanwhile, WTI was 1.63% or 68 cents lower at $41.06 per barrel, having recouped some of the previous session’s losses.

Conflicting sentiments continue to dominate market chatter, with US production expected to decline, as the Brent-WTI spread lurks either side of $3 per barrel level in the global benchmark's favour against its US counterpart.

Steve Murphy, US economist at Capital Economics, said, “US drilling activity continues to fall and the latest downward leg in crude oil prices is more bad news. Actual production has also been falling for several months now.”

Analysts at Barclays said front end of the WTI curve has done most of the work to manage the apparent oversupply. "This may be a signal that the market believes the situation is short-term. Fall turnarounds have ended and runs should continue to tick higher, helping manage stock levels through end of the fourth quarter.

“However, in the first quarter of 2016, Brent-WTI should widen to discourage imports during turnarounds, highlighting more downside risk to WTI than Brent, in our view.”

Base metal futures stayed broadly within the current range as well in late afternoon European trading, with copper slipping further. The three-month copper delivery futures contract, dragged down to historic lows in recent sessions, fell another 0.4% to $4,685 per metric tonne on the London Metal Exchange.

Additionally, primary aluminium (up 0.9%), nickel (down 0.8%), tin (up 0.1%), zinc (down 1.1%) and lead (up 0.2%) LME futures showed little sign of a recovery.

Liz Grant, senior account executive at Sucden Financial, said, “LME metals, which continue to suffer from poor sentiment and a weakening technical picture, appeared to lose more ground on Tuesday as copper led the complex lower. Copper broke below $4,600 during the Asian session but gradually recovered through the Western trading day.”

Concurrently, precious metals fell into negative territory, dragged lower by gold. COMEX gold futures contract fell 1.64% or $17.80 to $1,065.80 an ounce while spot gold was 1.29% or $13.99 lower at $1,068.77 an ounce. Away from gold, COMEX silver was broadly down 0.61% to $14.14 an ounce, while spot platinum fell 1.33% or $11.50 to $854.50 an ounce.

Finally, headline agricultural commodity futures were on a mixed patch in early trading stateside. CBOT corn (down 0.14%), wheat (down 1.97%) and ICE cocoa (down 0.38%) contracts registered declines, while ICE cotton (up 0.89%) and CME live cattle (up 0.91%) saw an uptick.