Commodities: Oil recovers, base metals remain in negative territory

Oil benchmarks recovered in European trading on Tuesday, after trading lower for much of the Asian session, while base metal futures continued to slip further.

At 1501 BST, the Brent front month futures contract was up 0.41% or 19 cents to $46.56 per barrel, having registered losses for much of the Asian session. WTI futures, up 0.64% or 28 cents to $44.28, also recovered.

Meanwhile, ratings agency Moody’s said strong negative trends in the offshore oil drilling industry will remain deeply entrenched through 2017 and drillers' contracted revenue backlogs, fleet utilisation and cash flows will continue to slide. “Sustained weakness in crude prices and a steady supply of newbuilds will depress day rates and create significant stress on the sector,” it added.

Pressure on base metal futures showed little sign of easing on the London Metal Exchange for yet another session, with major contracts extending losses further on persistent concerns about China’s economic prospects.

Past the midway point of trading on the LME, three-month delivery contracts of primary aluminium (down 0.2%), copper (down 0.5%), lead (broadly flat), nickel (down 1.1%), tin (down 0.3%) and zinc (down 2.1%) were in negative territory.

Analysts at Sucden Financial noted: “Disappointing industrial production and fixed asset investment data from China put pressure on Asian equity markets right at the start of the week. Copper dipped below 5300 briefly on Monday to 5287, but with the September prompt now in view, there was much more interest and emphasis on the spreads than the three-month business.”

Meanwhile, gold trading returned to lacklustre mode as investors’ focus shifted to the US Federal Reserve, and whether the central bank would hike the country’s interest rates in Thursday. COMEX gold for December delivery was down 0.29% or $3.20 to $1,104.50 an ounce, while spot gold was down 0.26% or $2.93 at $1,106.17 an ounce.

Concurrently, COMEX silver was down 0.51% or seven cents at $14.29 an ounce, but spot platinum staged a marginal recovery run registering a 0.35% or $3.35 gain to $958.45 an ounce.

Finally, agricultural commodities futures conveyed a mixed picture. CBOT corn (down 0.25%) and wheat (down 1.00%) contracts lost some of the ground gained yesterday. ICE cotton (up 0.27%) and CME live cattle (up 0.35%) futures were in positive territory, but ICE coca (down 1.10%) slipped lower.