Commodities: Oil, precious metals stabilise but copper hits six-year low

Oil and precious metals stabilised on Tuesday, but copper plummeted to a six-year low in European trading over fears of a Chinese slowdown.

At one point during the session, copper futures dropped almost 2% to $4,955 a tonne; just $100 above level last recorded in 2009. However, past the midway point of trading on the London Metal Exchange, the three-month delivery copper contract had clawed back 1.0% to $4994.25 a tonne.

Nickel traded 0.2% lower at $9895 per metric tonne, but most other LME three-month futures contracts, including primary aluminium (up 0.8%), lead (up 0.4%), tin (up 2.9%) and zinc (up 0.9%) were trading in positive territory.

Liz Grant, senior account executive at Sucden Financial said China’s economic correction looks set the weigh on investors’ minds. “Data released earlier in the week showed Chinese industrial company profits were down nearly 9% in August year-on-year. As we approach the month/quarter end and ahead of a week-long Chinese holiday, LME metals remain under pressure with the underlying fears over the Chinese economy still driving sentiment.”

Precious metals stabilised led by gold futures, as the yellow metal managed to stem massive declines seen in wake of US Federal Reserve Chairwoman Janet Yellen’s assertion that an interest rate rise was still possible over the remaining months of the year.

At 1534 BST, COMEX gold for December delivery was broadly flat at $1,130.70 an ounce, as was spot gold at $1,131.60 an ounce. Spot platinum was $2.10 or 0.23% lower at $916.55 an ounce, while COMEX silver was 0.94% or 14 cents higher at $14.68 an ounce.

FXTM research analyst Lukman Otunuga noted gold has experienced a sharp change of direction and fallen to the downside in light of Fed comments. “The precious metal which hit a one-month high last week, has given back those gains and more. With market instability and investor anxiety creating erratic moves within gold, more direction for the metal may be provided once market participants digest the key data releases regarding developments in Asia and Europe this week.”

Meanwhile, oil benchmarks reversed the previous session’s declines, with the Brent front-month futures contract trading 2.51% or $1.19 higher at $48.53 a barrel. Concurrently, WTI was up 2.32% or $1.03 at $45.46 a barrel, carrying along a predictable tangent of spikes and dives as the market struggles to find direction.

Analysts at Barclays expect a moderation in Chinese oil demand. “However opportunistic storage-linked buying to fill commercial and strategic reserves could still provide support. Unreported crude stocks have built at 459,000 barrels per day (bpd) over the January to August period.

“The IEA estimates a strategic petroleum reserve fill rate of 380,000 bpd until end-2015 based on sites set to be completed by year-end. However, the number could be larger should commercial facilities also be used in the interim, in our view. Leasing of commercial facilities have already been reported in the newswires and the private sector is also actively adding storage capacity.”

Finally, headline agricultural commodities futures were largely in positive territory. CBOT corn (up 0.19%), wheat (up 0.45%) and ICE cotton (up 0.69%) futures were trading higher, but ICE cocoa (down 1.48%) and CME live cattle (down 1.97%) futures registered substantial declines.