Commodities: Oil heads lower as glut concerns dominate market sentiment

With Iran still not clarifying its stance on whether or not it would back a Saudi-Russian production ‘freeze’ initiative, and both Saudi Arabia and Russia saying that they might freeze but not cut output, Brent and WTI front-month futures tumbled.

Meanwhile, data from the US Energy Information Administration on Thursday showed the country's crude oil inventories rose by 2.1m barrels last week to a peak of 504.1m barrels. It marked the third week of record highs in the past month and added to concerns about the global oversupply.

At 1623 GMT, the Brent front-month oil futures contract was down 3.68% or $1.26 at $33.02 per barrel, while WTI was down 4.52% or $1.39 at $29.38 per barrel.

Jasper Lawler, analyst at CMC Markets, said follow-up statements by Saudi and Russian officials had undermined their own production freeze agreement.

“We saw another build-up in US weekly inventories, and that has renewed supply-glut fears over the last two trading days. The freeze plan looked positive, but arguably the agreement has been undermined with both Russian and Saudi oil ministers saying afterwards that they do not plan an output cut.”

Meanwhile, precious metals stayed on positive turf extending the previous session’s gains. The COMEX front-month gold futures contract was up 0.42% or $5.10 at $1,231.40 an ounce, while spot gold was up 1.18% or 10 cents to $1,232.40 an ounce.

Spot platinum rose 0.49% or $4.64 to $949.39 an ounce, but COMEX silver fell 0.21% or three cents to $15.40 an ounce.

With the exception of lead (down 0.2%), headline three-month base metal futures stayed in positive territory on the London Metal Exchange. At 1635 GMT, tin (up 1.3%), nickel (up 1.5%), copper (up 0.1%) and primary aluminium (up 2.2%) were in the green zone.

Liz Grant, senior account executive at Sucden Financial, said, “LME prices stayed largely contained within the trading range of the week but turnover was better than has been seen in recent days.

“Copper made further forays above $4,600/t but with equities and crude oil both retreating at the end of a “steady” week, the market struggled to gain traction and prices slid back during the course of the London day. Meanwhile, more lead stock appeared in LME warehouses in Vlissingen, Netherlands, which kept the three-month price pegged below $1,750/t.”

Finally, major agricultural commodity futures were on mixed turf. CBOT corn (up 0.14%) and CME live cattle (up 0.14%) traded higher in early calls stateside, while CBOT wheat (down 0.05%), ICE cotton (down 1.20%) and cocoa (down 0.34%) futures headed lower.