Commodities: Brent-WTI spread narrows before US oil inventories data, gold continues recovery run

While both Brent and WTI rose in tandem, the latter’s climb was more pronounced and helped with lowering the spread between the benchmarks to below $5 per barrel. Both benchmarks briefly came together at $48.05 on 11 January, but the spread widened well above $5 in Brent's favour over the following months.

Bullish calls continued in Singapore, as traders took their cue from a US Department of Energy report noting that the country’s oil production stood at a robust 9.6m barrels a day (bpd) in May, but that it is expected to "generally decline" through early 2016. Furthermore, US inventories data, due out later on Wednesday, is expected to show a decline, even though stockpiles remain at their highest since the 1930s.

At 0934 BST, the Brent month futures contract for July delivery was trading up $1.20 or 1.85% at $66.08, while the WTI was up $1.42 or 2.36% at $61.56.

Chris Beauchamp, senior market analyst, IG said: “Oil prices were heavily bid upon in the last session, thanks to some fancy forecasting that points towards a drop in production in US shale output next month.”

“This seems like a case of ‘jam tomorrow’ for crude buyers, but it has been enough to prompt the biggest one-day rise in oil [on Tuesday] for the month so far. However, this also looks like a bit of rapid short-covering, and should production rebound in August, we can expect the downward progression in crude to resume.”

With stock markets falling across the board in Europe, investors also piled into precious metals helping gold and silver stay in the green.

COMEX gold for August delivery continued its recovery to $1,181.50 an ounce up 0.33% or $3.90, while COMEX silver for July delivery was up 10 cents or 0.65% at $16.06 an ounce. Spot platinum was also up $7.49 or 0.68% at $1,114.69 an ounce.

Calmness also returned to the base metals market after a tepid start to the week. The three-month copper contract limped back above $6,000-level, but only just, at $6,002 per tonne up 0.9% or $55 on the London Metals Exchange.

Zinc (up 1.7%), nickel (0.4%), lead (0.9%) and aluminium (0.6%) were all in the green, but tin (down 0.3%) ended overnight trading lower. On the agricultural commodities front, the market was greeted with news the India and Iran were to enhance trading in wheat, corn, rice and oilseeds.

Indian newswire PTI said a ministerial level meeting between both parties took place on the sidelines of the Food and Agriculture (FAO) conference in Rome. Both countries are also reportedly mulling a barter arrangement on exchange of agri-products from India for Iranian oil.

CBOT wheat contract was up $4.25 or 0.80% at $536.50 a bushel, while ICE cotton (up 0.20%) and CME live cattle (up 0.84%) were also in the green. Going the other way, CBOT corn (broadly flat) and ICE cocoa (down 0.19%) were trading lower.