Commodities: Base metals see modest gains as oil slips further

Earlier, the People's Bank of China injected CNY 100bn (£10.6bn) into the money markets in the form of short term loans. The move was an obvious bid to stave off liquidity pressures ahead of the Chinese New Year holiday, which begins on 7 February and lasts a week.

It was the first of the usual two weekly money market injections the bank performs. However, lacklustre economic data from the US and China overnight, and little movement on the possibility of oil production cuts meant oil prices continued to slide.

At 1638 GMT, the Brent front-month futures contract was down 3.04% or $1.07 to $33.20 per barrel, while WTI was 3.29% or $1.05 lower at $30.58 per barrel, following another rocky session for the oil markets.

Jasper Lawler, analyst at CMC Markets, said, “Oil appears to be entering another crash-phase. The crash has sent Brent slumping by over 5% and taken WTI crude back below $30 per barrel. This comes on the back of a 7% decline yesterday. The oil market is pre-pricing what is now considered an unlikely joint cut in production from Russia and OPEC.”

However, base metal futures posted marginal gains across the London Metal Exchange board. At 1635 GMT, the much scrutinised three-month copper delivery contract was up 0.2% to $4,542.50 per metric tonne, but still within range of six-year lows.

Concurrently, primary aluminium (up 0.1%), zinc (up 2.0%), lead (up 1.5%) and tin (up 0.6%) contracts also headed higher, but nickel (down 1.2%) futures continued to slide.

Precious metal contracts failed to hold on to overnight gains despite registering upticks for much of the Asian session. COMEX gold futures for April delivery fell 0.18% or $2.00 to $1,125.90 an ounce, while spot gold was 0.30% or $3.37 lower at $1,125.04 an ounce.

COMEX silver futures fell 0.33% or five cents to $14.30 an ounce, while spot platinum fell 1.72% or $14.93 to $855.32 an ounce. Liz Grant, senior account executive at Sucden Financial, said, “The LME morning session saw prices mostly higher, led by copper which pushed up through $4,600 in early trading, supported by a slightly weaker dollar.

“However, as the day continued, with oil prices under more pressure and equity markets also moving sharply lower, the upside momentum in base metals was lost and prices retreated across the board. Gold shone brightly as "safe haven" trades were put on and a new recent high was made at $1,131, levels not seen since March 2015, before a correction.”

Finally, headline agricultural commodity futures were largely on positive turf. CBOT corn (up 0.54%), wheat (up 1.00%) and ICE cotton (up 0.55%) traded higher in early calls stateside, but ICE cocoa (down 3.52%) and CME live cattle (down 0.09%) were in the red.