Commodities: Oil strengthens on US inventory data, gold and base metals hold levels

Oil benchmarks regained some ground in Europe on Friday, after US stockpile data published overnight pointed to a decline above market expectations.

The US Energy Information Administration said the country's commercial crude oil inventories dropped by 2.8m barrels in the week ended 22 May.

This was more than the 1.8m decline expected by analysts polled by data aggregator Platts. At 09:23 BST, the Brent front month futures contract was trading up 0.85% or 53 cents at $63.11 a barrel, while WTI rose 1.06% or 61 cents at $58.29 a barrel extending the recovering that commenced Stateside late on Thursday.

Nevertheless, the total inventory count at 479.4m barrels is still at the highest level for this time of year in at least the last 80 years. Oversupply concerns have not eased and commentators believe it is highly unlikely that OPEC would cut its production next week.

Chris Beauchamp, senior market analyst, IG, said: “Hopes have been dashed that OPEC will take any action at its meeting next week, and having seen the price rally hard over the course of 2015 so far, the cartel’s members will be even more disinclined to cut output than they were at the last general get-together.

“Supply is slowing, as is capital expenditure in the oil and gas sector, but it will have to stay on this trend for months to come to really eat away at the vast overhang that has been built up."

Precious metals held firm albeit close to the previous session’s price levels with talk of a US interest rate rise at some point over the course of this year not helping gold traders’ quest for stability above the $1200-level. COMEX gold was broadly flat at 1,188.60 an ounce down a mere 20 cents, while spot gold was fetching 1,188.32 an ounce down eight cents. Silver was also largely unmoved in early European trading at $16.70 an ounce up barely three cents.

Base metals market mirrored the calmness with most delivery contracts either broadly flat or marginally in positive territory on the London Metal Exchange. Three-month contracts for aluminium (up 1.3%), copper (down 0.2%), lead (up 0.8%), nickel (down 0.4%), tin (down 0.5%) and zinc (up 1%) summed up overnight trading.

On the agricultural commodities front, CBOT corn (up 0.07%), ICE cotton (up 0.79%) and CME live cattle (up 0.88%) contracts were in the green, while ICE cocoa (down 0.51%) and CBOT wheat (down 0.97%) were trading lower.