Commodities: Oil plummets, copper drags base metals lower

At 1703 GMT, the Brent front-month futures contract for December delivery was down 0.25% or 12 cents to $48.46 per barrel while the WTI was down 0.82% or 38 cents at $45.94 per barrel. An extremely volatile session saw both benchmarks post gains in early Asian trading, only to slip into decline in Europe, before yet again staging a minor clawback in early US trading.

Oversupply concerns haunted trading sentiment for much of the day on the possibility of incremental barrels coming from Iran and Iraq, barely a day after the US Energy Information Administration reported commercial crude inventories rose by 2.8m barrels in the last week to a total of 482.8m barrels.

The data implied a sixth successive weekly rise, while crude oil imports by the US dropped to their lowest level in almost 25 years. However, chatter in the commodities sphere was dominated by the base metals market, where copper futures took a tumble in the face of a stronger dollar, dragging much of the metals complex lower.

As the greenback rose to its highest level against a basket of global currencies in over two months, after Federal Reserve Chairwoman Janet Yellen pointed to a possible December interest rate hike, copper futures plummeted to a one month low.

In late afternoon trading on the London Metal Exchange, the three-month copper delivery futures contract was down 2.3% to $5,052.75 per metric tonne. Additionally, primary aluminium (down 0.5%), lead (down 1.7%), nickel (down 1.9%), tin (down 2.0%) and zinc (down 2.0%) futures also traded lower.

Steve Hardcastle, head of client liaison at Sucden Financial, said the session was a disappointing one with no fresh incentives. “Fed rate hike is becoming more likely, with a weaker euro and deteriorating sentiment for base metals following the fall in German Industrial orders.

“Against this background, the marginally firmer sentiment from China has had little effect on prices except aluminium which has held relatively steady.”

A stronger dollar also continued to dent confidence in the precious metals market. COMEX gold was broadly flat at $1,106.40 an ounce, while spot gold was 0.15% or $1.65 lower at $1,106.25 an ounce, extending overnight declines further. COMEX silver fell 0.42% or six cents to $15.00 an ounce, while spot platinum was 0.48% or $4.62 lower at $949.78 an ounce.

Finally, headline agricultural commodity futures were on a mixed patch. CBOT wheat (up 0.29%), ICE cotton (up 0.23%) and cocoa (up 0.89%) futures were all trading higher, while CME live cattle (down 1.53%) and CBOT corn (down 1.12%) were trading lower in early US trading.