Commodities: Oil rises on IEA production decline forecast

Oil futures returned to positive territory on Monday, after the International Energy Agency put out forecasts predicting a gradual supply correction over the next two years.

Easing concerns about the supply glut, the agency noted in its medium-term outlook that US shale oil production was expected to fall by 600,000 barrels per day (bpd) this year and another 200,000 bpd in 2017.

Additionally, while Iran remains non-committal, Nigeria suggested it would be in favour of an oil production freeze initiative put forward by Saudi Arabia, Russia, Venezuela and Qatar last week. At 1653 GMT, the Brent front-month oil futures contract was up 5.15% or $1.70 at $34.71 per barrel, while WTI was up 6.68% or $1.98 at $31.62 per barrel.

Jasper Lawler, analyst at CMC Markets, said, “The previous two sessions of oil market declines have not undone the gains after the production freeze was announced. A close above $36 per barrel in Brent crude could see more shorts unwound and a fairly rapid move towards $40.”

Meanwhile, precious metals headed lower shedding some of the past week’s gains. The COMEX front-month gold futures contract was down 1.58% or $19.40 at $1,211.40 an ounce, while spot gold was down 1.26% or $15.42 cents to $1,211.38 an ounce.

Spot platinum fell 1.13% or $10.65 to $928.75 an ounce, but COMEX silver fell 1.03% or 16 cents to $15.22 an ounce.

Headline base metal futures stayed in positive territory on the London Metal Exchange. At 1635 GMT, three-month futures contracts of tin (up 1.1%), nickel (up 3.4%), copper (up 2.3%), primary aluminium (up 1.7%) and lead (up 1.0%) posted decent upticks.

Liz Grant, senior account executive at Sucden Financial, said, “LME turnover returned to "normal" levels on Monday and prices were steady on the back of higher equities and oil. Prices rose during the overnight Asian session, following good closes last week and the momentum was carried through the London day even with a stronger dollar.

“Copper rose to challenge $4,700/t area with a 3kmt LME stock decline. But with equities back in favour and oil prices recovering, gold gave up some gains, trading back to 1202 and last at 1210.”

Finally, headline agricultural commodity futures were on positive turf. CBOT corn (up 0.81%), CME live cattle (up 1.21%), ICE cotton (up 0.34%) and cocoa (up 0.4%) futures headed higher in early trading calls stateside.