Commodities: Oil price drops to seven-year low

Oil futures registered further declines with Brent slipping to a seven-year low on Friday, after the International Energy Agency (IEA) suggested a demand correction was likely next year.

In its assessment of the market, the IEA said oil demand in the current quarter was growing by 1.3m barrels a day (bpd), down from 2.2m bpd barrels in the previous quarter. The agency also predicted that demand growth will slip back to 1.2m bpd next year.

With OPEC confirming its production for November stood at 31.7m bpd, well above its published quota of 30m bpd, Brent slipped to $38.53 per barrel, down 3.02% or $1.20 at 1604 GMT, its lowest level since December 2008. Concurrently, WTI was down 2.26% or 83 cents $35.93 per barrel.

Away from the oil market, most metal futures headed upwards during late afternoon trading in Europe. At 1635 GMT, three-month delivery contracts of primary aluminium (up 0.1%), tin (up 0.1%), lead (up 2.0%) and zinc (up 1.8%) were trading higher on the London Metal Exchange. The copper contract, still at historic lows, remained under pressure trading at $4,712.50 per metric tonne, up 2.7%.

Steve Hardcastle, head of client liaison at Sucden Financial, said, “Copper experienced a much more positive day propelled initially by comments from China’s National Statistics bureau that the economy is showing signs of a small recovery.

“Pre-weekend short covering became flavour of the day and subsequently the US consumer figures added further heat to the market, pushing it from last night’s close of $4,590 to a high of $4,736. This giddy height proved unsustainable as short covering dried up and the technical picture held sway.”

Precious metals complex remained under pressure with many traders pricing in a US interest rate hike. COMEX gold futures contract was marginally up 0.26% or $2.80 to $1,074.80 an ounce, while spot gold was 0.40% or $4.27 higher at $1,075.85 an ounce. COMEX silver was down 1.38% or 19 cents to $13.92 an ounce, while spot platinum was down 1.19% or $10.20 to $844.60 an ounce.

Jasper Lawler, analyst at CMC Market, said, “After falling alongside oil prices early on, gold found value as a safe haven once stock market losses started to accelerate. Disappointing US retail sales growth increases the risk of Fed policy error by raising rates next week amidst a decelerating economy. Gold is being used as Fed disaster protection.”

Finally, agricultural commodity futures were on a mixed patch in early trading stateside. CBOT corn (down 0.66%), CBOT wheat (down 0.71%) and ICE cotton (down 0.06%) futures headed lower. However, ICE cocoa (up 0.18%) and CME live cattle (up 0.67%) futures posted decent upticks.