Commodities: Oil, metals recoup losses in European trading

Oil benchmarks and metals recouped losses on Tuesday, following a heavy selloff overnight on concerns over the Chinese economy.

Dire data from China sent oil prices to their lowest levels since January, while gold plummeted to five-year lows over the previous session as China’s Caixin/Markit manufacturing Purchasing Manager’s Index (PMI) came in at 47.8; its lowest level since July 2013. It stoked fears yet again about the country’s economy cooling off, with no signs of a holistic economic stimulus from Beijing in sight.

However, Tuesday’s session began on a calmer footing in Asia, with the recovery gathering momentum late in European trading. At 1508 BST, the Brent front month futures contract was higher by 1.11% or 55 cents trading at $50.18 a barrel, while WTI rose 1.86% or 84 cents to $46.01.

With market fundamentals not altering materially, some feel the oversupply situation would remain a drag for a while. Analysts at Deutsche Bank noted: “Although we expect US tight oil production to fall over the rest of the year, drilling activity has showed signs of an incipient but shallow rebuilding trend in the last month.

“If continued, this would result in the resumption of month-on-month US supply growth starting in 2016, and no sizeable decline on an annual average basis.”

Precious metals also rose tentatively, with COMEX gold for December delivery up $1.70 or 0.16% to $1,091.10 an ounce, while spot gold rose 0.40% or $4.37 to $1,091.16. Concurrently, COMEX silver for September delivery rose 0.38% or six cents to US$14.57 an ounce.

However, spot platinum continued to plummet, shedding $5.62 or 0.58% to $955.93 an ounce with an oversupplied market and lacklustre macro-climate doing little to help reverse the slide.

Meanwhile, base metals market also saw a strong bounceback taking back some of Monday’s losses. Past the midway point in trading on the London Metal Exchange, three-month futures contracts of primary aluminium (up 0.5%), copper (up 0.8%), lead (up 1.4%), nickel (up 0.8%), tin (up 0.9%) and zinc (up 1.1%) were all trading higher.

Finally, agricultural commodities were also largely back in positive territory. CBOT corn (up 0.60%), wheat (up 0.65%), ICE cocoa (up 0.38%) and CME live cattle (up 0.44%) contracts were trading higher. However, ICE cotton was down 0.58% or 37 cents to $63.63 per pound, with sluggish demand in the Americas adding to concerns over lower importation volumes from China.