Commodities: Brent oil caps $40/bbl level, platinum rises above $1,000/oz

Oil futures began the week on positive turf, with Brent and WTI futures posting gains for much of the European session on Monday.

At 1629 GMT, focus remained on oil market fundamentals and in favour of a supply correction, as the Brent front month futures contract rose 3.41% or $1.32 to $40.04 per barrel, while the WTI rose 3.40% or $1.22 to $37.14 per barrel.

In a note to clients, Fitch Ratings said major European oil companies will not be able to balance cash inflows and outflows in 2016 under its oil price expectations, resulting in higher net debt and a further sharp deterioration in credit metrics.

The ratings agency assumes Brent to average $35 per barrel in 2016, before recovering to $45 per barrel in 2017, $55 per barrel in 2018 and $65 per barrel in the long-term.

Last week, the International Energy Agency noted that US oil production had fallen by about 25,000 barrels per day to just over 9m bpd, down from a peak of 9.6m bpd in April, soothing concerns about a supply glut.

Furthermore, Saudi Arabia’s comments that it would work with other producers to limit oil market volatility also boosted confidence. Analysts at Barclays remain bearish over the short term, but bullish for the second half of the year. “Stockbuilds will continue in 2016 but less so towards year-end," they added.

Away from oil markets, precious metals saw mixed trading. The COMEX front-month gold futures contract was marginally down by 0.28% or $3.60 at $1,267.10 an ounce, while spot gold was up 0.54% or $6.80 to $1,265.75 an ounce.

COMEX silver fell 0.22% or three cents to $15.66 an ounce, while spot platinum rose 2.34% or $22.86 to $1,001.66 an ounce; a jump above the psychological $1,000-level for the first time since October 2015.

Headline base metal futures were largely higher across the London Metal Exchange, as the Chinese National Peoples’ Congress met over the weekend, issuing comments interpreted as positive for the commodities market.

At 1635 GMT, three-month futures contracts of primary aluminium (+0.8%), nickel (+1.0%), lead (+1.5%), tin (+1.8%), and copper (+0.5%) headed upwards, with the latter just short of the psychological $5,000/t level, which it had breached over the previous session. However, zinc (-1.6%) futures strayed away from the market direction and headed lower.

Liz Grant, senior account executive at Sucden Financial, said, "Following the developments in China, iron ore rallied sharply – up approximately 20% from Friday – as the country signalled further resolve to shut down excess capacity in the steel sector.

“Copper opened in Asia slightly up at $5,000/t, moving quickly to $5,035/t. The rest of the LME metals, in particular lead which moved to challenge $1,900, were all steady, bar aluminium which is still pegged below $1,600 with more stock delivered into LME attracted by the nearby backwardation. Business activity was largely routine and turnover was moderate.”

Finally, agricultural commodity futures were largely on the up. CBOT corn (+0.70%), wheat (+1.47%), ICE cocoa (+0.13%) and cotton (+0.61%) contracts headed higher. However, CME live cattle (-0.39%) futures slipped in early trading calls stateside.