Commodities: Oil remains negative in Europe, corn futures cool off

Oil futures remained negative on Tuesday, as Brent’s return above the $50 per barrel level overnight proved to be short-lived, while corn futures turned sharply lower tempering an overnight spike of above 4%, and base metals remained in the red.

At 1323 BST, the Brent front month futures contract was down 1.71% or 86 cents at $49.55 a barrel, retreating from $50-level calls overnight. Concurrently, the WTI slipped 2.34% or $1.05 to $43.91, as fresh oil market data published by OPEC indicated the cartel’s production volumes had reached a new record high in July.

Its latest monthly oil market report recorded a near 101,000 barrels per day (bpd) increase in output to 31.5m bpd in July, with Iran recording its highest incremental production rate since 2012.

"Crude oil output increased mostly from Iraq, Angola, Saudi Arabia and Iran, while production in Libya showed the largest drop," OPEC noted.

Earlier, this month OPEC Secretary General Abdalla Salem El-Badri ruled out an extraordinary meeting of member nations in light of the continuing oil price decline.

Commenting on the continuing price slide, Capital Economics noted: “The falls mainly reflect positive supply-side developments and are also small compared to those that have gone before. What’s more, we continue to expect oil prices to recover, albeit gradually, over the next year or so, rather than drop further.”

Spikes and drops in the corn futures market brought agricultural commodities to the foreground. After rising by as much as 4.69% overnight on expectation the US Department of Agriculture will reduce corn production forecasts, the CBOT corn futures contract for December delivery fell 1.62% or $6.50 to $394.50 per bushel at 1327 BST, as traders countered prevalent bullishness by factoring in a more favourable weather outlook for key corn growing centres stateside over the next fortnight.

Elsewhere, CBOT wheat futures contract was down 1.23%, ICE cotton was broadly flat, while ICE cocoa and CME live cattle futures were up 0.23% and 0.52% respectively.

Meanwhile, base metal trading turned negative as China moved to devalue the yuan by 1.9%, described by Beijing as a “one-off depreciation” in light of disappointing economic data.

In real terms, the yuan has gained over 50% against all three of the other BRIC (i.e. Brazil, Russia, India and China) currencies in the last decade with its valuation looking increasingly unsustainable as the others have seen their currencies tumble, according to Societe Generale analysts.

Past the midway point in trading on the London Metal Exchange, three-month delivery contracts of primary aluminium (down 0.3%), copper (down 0.1%), lead (down 2.0%), nickel (down 2.3%) and zinc (down 2.2%) were in negative territory. Only tin futures, up 1.7% or $250 at $15,375 per tonne bucked the trend.

Finally, gold continued to stabilise above the $1,100 level but other precious metals turned marginally negative in European trading. COMEX gold for December delivery was up 0.38% or $4.20 at $1,108.30 an ounce, while spot gold was up 0.35% or $3.87 to $1,108.38.

However, COMEX silver for September delivery was down 0.37% or six cents at $15.24 an ounce, while spot platinum also went back into negative territory, shedding 0.14% or $1.35 to $984.65 an ounce.