Commodities: Oil futures inch higher, but gold retreats

With Saudi Arabia commenting that it would work with other producers to limit oil market volatility, selected analysts opined there were hints the market had bottomed out.

Overnight, the Saudi cabinet issued a statement noting: "The kingdom (of Saudi Arabia) seeks to achieve stability in the oil markets and will always remain in contact with all main producers in an attempt to limit volatility and it welcomes any cooperative action.”

Saudi Arabia and fellow OPEC members Venezuela and Qatar agreed with non-OPEC Russia last month to freeze output at January levels. However, Iran refused to join in while it takes advantage of the recent lifting of its international economic sanctions.

At 1701 GMT, the Brent front month futures contract was up 1.23% or 45 cents to $37.02 per barrel, while the WTI rose 2.16% or 73 cents to $34.48 per barrel.

Chris Beauchamp, senior market analyst at IG, said, “Both Brent and WTI are held up well on Tuesday and there is every reason to expect more upside. Too many traders have been caught out trying to short the market over the past week or so, with little sign so far that the bounce has run its course.”

Analysts at Barclays noted: “The recent output freeze talks are unlikely to have any immediate impact on market balances, given the producers who have agreed to freeze production (as well as those indicating willingness) are already producing close to their full capacity.

“We think what it does represent, however, is an exercise in building broader cooperation between producers, and thereby is likely to prove a litmus test for building trust, as Saudi Oil Minister Ali al-Naimi recently opined.”

Away from oil markets, precious metals slipped into negative territory. The COMEX front-month gold futures contract was down 0.35% or $4.30 at $1,230.10 an ounce, while spot gold was down 0.62% or $7.65 to $1,231.02 an ounce.

COMEX silver fell 0.82% or 12 cents to $14.80 an ounce, but spot platinum bucked wider trends to head 0.46% or $4.26 higher to $938.11 an ounce.

Headline base metal futures were largely higher across the London Metal Exchange board. At 1635 GMT, three-month futures contracts of nickel (up 1.7%), lead (up 0.5%), tin (up 0.9%) and copper (up 0.6%) headed higher, but the primary aluminium (down 0.2%) contract was marginally lower.

Liz Grant, senior account executive at Sucden Financial, said, “Base metals were under pressure through the Asian session but recovered towards the end of the session with further gains made during the London morning as equities and oil strengthened and LME stocks showed further declines.

“Once again, as the market seeks direction, trading conditions were choppy, prices mostly range bound and turnover was moderate at best.”

Finally, agricultural commodity futures were on mixed turf. CBOT corn (down 0.21%), wheat (down 1.54%) and ICE cocoa (down 0.74%) futures headed lower. However, ICE cotton (up 0.34%) and CME live cattle (up 0.0.8%), headed higher in early trading calls stateside.