Commodities: Oil futures slide on Iraqi production data

Oil futures fell back into negative territory on Thursday, after bullish calls following an unexpected dip US crude oil inventories petered out and Iraqi data pointed to an above average crude exports figure.

Overnight, US Department of Energy’s data arm – Energy Information Administration – said the country’s crude inventories fell 4.9m barrels in the week to 1 April, compared with analysts' expectations for an increase of 3.1-3.3m barrels.

Crude stocks at the US oil delivery hub of Cushing, Oklahoma, rose 357,000 barrels, the EIA added. Concurrently, US crude imports fell by 446,000 barrels per day (bpd), owing to weather issues in the Houston Ship Channel last week.

However, earlier in the session Iraq's state-run South Oil Company said oil exports had risen to average of 3.494m bpd in April, well above the 3.286m bpd average for March.

The data, together with market doubts over whether major oil producers can actually agree to cut or hold production at a meeting in Doha on 17 April sent prices tumbling. Elsewhere, analysts at investment bank Goldman Sachs said a $35 per barrel oil price was about par for US shale oil producers.

At 1817 BST, the Brent front month futures contract was down 2.13% or 85 cents to $38.99 per barrel, while WTI futures fell 2.23% or 84 cents to $36.91 per barrel.

David Rees, senior markets economist at Capital Economics, said, “The Doha meeting will probably result in some kind of deal to cap oil production. But any agreement is unlikely to provide lasting support to oil prices.

“Production would simply be frozen at high levels, Iran is unlikely to participate in any deal and a meaningful increase in global demand for oil is probably not imminent. Our end-year forecast for Brent is therefore $45 per barrel, with some further gains to around $60 per barrel next year.”

Away from oil markets, precious metals recovered from the previous session's declines as the dollar weakened following dovish minutes from the US Federal Reserve’s latest monetary policy committee meeting. The COMEX gold June futures contract rose 1.14% or $14.00 to $1237.80 an ounce, while spot gold was up 1.18% or $14.38 to $1,236.85 an ounce.

COMEX silver fell 1.00% or 15 cents to $15.21 an ounce, while spot platinum also jumped 1.00% or $9.53 to $954.96 an ounce.

Headline Base metal three-month futures were firmly in negative territory on the London Metal Exchange at 1635 BST with the exception of the tin (+0.5%) contract. Primary aluminium (-0.7%), zinc (-2.4%), lead (-1.3%) and copper (-2.7%) headed lower.

Liz Grant, senior account executive at Sucden Financial, said, "LME metals struggled for traction even with the weaker dollar. The FOMC minutes confirmed the Fed’s "dovish" stance in that further interest rate rises were unlikely before June at the earliest, but, moreover it signalled further caution over the global economy. This appears to have been the catalyst for the selloff we have seen today.”

“In choppy trading conditions, copper breached the recent support at $4,750 metric tonnes falling below $4,700 to $4,680 area as weaker longs were forced out, and to an eventual low of $4,641. Downbeat/bearish comments and reports from the miners and investors gathering at the Cecso copper conference in Santiago, Chile were also damaging to sentiment.”

Finally, agricultural commodity futures saw a mixed start to the US session. CBOT corn (+0.84%), ICE cotton (+0.48%) and CME live cattle (+0.57%) futures headed up in early trading calls stateside, while ICE cocoa (-1.51%) and CBOT wheat (-0.92%) slipped.