Commodities: Oil rally extends to fourth successive session

Overnight, the International Energy Agency said US oil production fell last week by about 25,000 barrels per day to just over 9m bpd, down from a peak of 9.6m bpd in April, soothing concerns about a supply glut.

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

However, the US Department of Energy’s statistical arm – the Energy Information Administration – reported the country’s crude oil inventories rose by 10.4m barrels to a total of 518m barrels last week, well above the 3.6m barrel increase expected by analysts, tempering market expectations.

Analysts at FinnCapp, said “Brent had a pretty stable week as the market continues to pin its hopes on the production freeze. Data for February from Russia was indeed flat at 10.38m bpd, but this level is almost a thirty-year high. We can expect a final decision on a oil producers’ freeze in March, which if not forthcoming will likely have a negative impact on the crude price.”

At 1600 GMT, the Brent front month futures contract was up 0.68% or 25 cents to $37.18 per barrel, while the WTI fell 1.38% or 48 cents to $35.14 per barrel.

Away from oil markets, precious metals stayed on positive turf. The COMEX front-month gold futures contract was up 1.04% or $12.90 at $1,254.70 an ounce, while spot gold was up 1.33% or $16.47 to $1,256.45 an ounce.

COMEX silver rose 0.95% or 14 cents to $15.17 an ounce, while spot platinum also rose 1.31% or $12.23 to $946.93 an ounce.

Headline base metal futures were largely higher across the London Metal Exchange board. At 1635 GMT, three-month futures contracts of nickel (+1.8%), lead (+2.0%), tin (+1.7%), zinc (+1.8%) and copper (+1.3%) headed upwards, with the latter rising to its highest levels in over three months. Going against market direction, primary aluminium (-0.1%) futures headed lower.

Analysts remain concerned about the long-term direction of the metals market. Ratings agency Moody’s views current weak prices and softer demand as an indication of a "fundamental shift" in the operating environment beyond a normal cyclical downturn.

Commentators at Macquarie said there was more bad news for ex-China producers. “Chinese smelters are generally the marginal cost producer for all metals, which means that lower Chinese costs, together with potential yuan depreciation, will be a headwind to global prices across the commodity spectrum.

“We could see more exports of aluminium, steel and potentially coal. China will structurally remain a major importer of iron ore, copper, nickel and zinc regardless of reforms due to their lack or resources in those metals, so these metals should be relatively less impacted by recent reforms.”

Finally, agricultural commodity futures were on largely positive turf. CBOT wheat (+0.72%), ICE cocoa (+0.61%) and cotton (+0.59%) futures headed higher, but CBOT corn (-0.21%) and CME live cattle (-0.49%) contracts slipped in early trading calls stateside.