Commodities: Oil stays in the green, precious metals surge in Europe

Oil benchmarks stayed in green territory over early European trading on Thursday, supported by a drop in US stockpiles.

At 0938 BST, the Brent front month futures contract for August delivery was up 77 cents or 1.21% at $64.64 per barrel while the WTI July contract was up 52 cents or 0.87% at $60.44 per barrel.

Overnight US data indicated that oil stockpiles Stateside fell by a further 2.7m barrels, representing the seventh successive weekly decline, sending both benchmarks higher in US trading on Wednesday.

Josh Mahony, analyst at IG, noted that any price rise was bound to be checked by a supply response: “With cost-cutting measures having driven down the level at which US fracking production becomes economically viable, the likeliness is that another move higher in crude would lead to supply coming back on to the market once more.”

Precious metals rallied following the conclusion of the US Federal Reserve’s latest monetary policy committee meeting on Wednesday which signalled that a US interest rate rise, while likely, was no longer imminent. With the Greek debt crisis escalating, craving for a safe haven sent gold above 10 June highs of $1,193 an ounce.

Mike van Dulken, head of research at Accendo Markets, said, “A slightly more dovish Fed update than expected last night – perhaps cautiously hawkish – served to weaken the dollar to the benefit of the precious metals market.”

COMEX gold for August delivery was up $19.60 or 1.67% to $1,196.40 an ounce, while spot gold was up $11.48 or 0.97% at $1,197.03 an ounce. COMEX silver for July delivery rose 1.99% or 32 cents to $16.27 an ounce, while spot platinum was trading 0.96% or $10.40 higher at $1,092.25 an ounce.

On the base metals front, the market situation alternated overnight to a mixed scenario from a complete rout. Three-month contracts of aluminium alloy (up 1.4%), nickel (up 0.8%) and tin (up 0.6%) got some respite on the London Stock Exchange but copper (down 0.4%), lead (down 0.6%) and zinc (down 1.1%).

Finally, selected agricultural commodities including CBOT corn (down 0.07%), ICE cotton (down 0.05%) and CME live cattle (down 0.38%) saw red. However, CBOT wheat (up 0.25%) an ICE cocoa (up 1.40%) were trading up.