Commodities: Oil spikes but market doubts persist as IMF cuts global growth forecast

Oil and gold futures spiked on Tuesday, while base metal trading remained mixed as the International Monetary Fund moved to cut its world growth forecast.

During the late afternoon session in Europe, commodities traders had to contend with the IMF downgrading its forecast for global economic growth this year to 3.1% from the 3.3% it predicted in July. It also revised the 2016 forecast lower from 3.8% to 3.6%.

The IMF also noted that emerging economies and commodities producers Brazil, Nigeria and Russia faced a challenging road ahead. "A return to robust and synchronised global expansion remains elusive," the fund noted.

However, oil futures continued higher after the US Energy Information Administration noted in its monthly forecast that the country's crude production will fall through mid-2016. The EIA also raised its 2016 world oil demand growth forecast to 100,000 barrels per day to 1.41 million bpd.

At 1606 BST, the Brent front-month futures contract for November delivery was up 4.63% or $2.28 at $51.53 per barrel. Concurrently, the WTI was up 4.15% or $1.92 at $48.18 per barrel.

On the precious metals front, COMEX gold futures contract was up 1.10% or $12.50 at $1,150.10 an ounce, while spot gold was 1.09% or $12.41 higher at $1,148.16 an ounce. COMEX silver rose 2.24% or 35 cents to $16.06 an ounce, while spot platinum was up 2.58% or $23.58 at $937.78 an ounce.

Meanwhile, selected base metal futures rose on the London Metal Exchange but declines in Asia meant a few contracts continued to trade lower. Past the midway point of trading, LME’s three-month delivery contracts of primary aluminium (up 0.1%), copper (up 0.5%) and tin (up 0.3%) were in positive territory, while lead (down 0.7%), nickel (down 0.6%) and zinc (down 0.3%) futures were heading lower.

In their quarterly assessment of the base metals market, analysts at Sucden Financial noted: "The mood remains depressed; the main driver is the slowdown in China and how that is affecting prospects for global growth."

"There seems to be growing acceptance that metals prices might have to fall further to correct the supply surplus and the stock overhang. In those metals where there is excess capacity and/or large stocks, prices may well head lower and this may trigger more supply responses, which could see some metals start to recover later in 2016."

Finally, agricultural commodities futures were largely in positive territory. CBOT corn (up 1.02%) and wheat (up 1.75%), ICE cotton (up 0.50%) and CME live cattle (up 0.27%) futures headed higher, while ICE cocoa (down 0.13%) headed marginally lower.