Commodities: Oil, gold stabilise after overnight hammering

Oil and gold stabilised in Asian trading on Thursday after taking severe knocks overnight.

Both Brent and WTI fell on Wednesday evening as oversupply considerations returned to hound investors’ thinking with the potential of additional Iraqi barrels adding to an already overflowing global supply pool.

At 8:57 BST, the WTI front month futures contract was trading up seven cents or 0.12% at $57.58 a barrel, while Brent was trading up 0.50% or 31 cents at $62.37 recovering some of the ground it lost overnight. Late on Wednesday, Brent shed as much as 1.80% before clawing back the losses.

The oil market would be looking at the US Department of Energy's weekly petroleum report, usually released on Wednesdays, but due Thursday this week owing to a public holiday on Monday for Memorial Day. According to the last report, US stockpiles currently stand at 482.2m barrels; the highest level on record since the 1930s.

Meanwhile, a draft report of OPEC's long-term strategy, published by Reuters ahead of its ministers' summit in Vienna on 5 June, forecast demand for its crude falling from 30m barrels per day (bpd) in 2014 to 28.2m in 2017.

Joshua Mahony, market analyst at IG, said, “Brent and US light crude are falling as a combination of a resurgent US dollar and an overstocked oil market begin to kick back in to reverse the gains seen since mid-March.

“The all-time record highs in US oil have been largely forgotten for many due to the weekly update highlighting the weekly reductions in supply that have been persisting throughout May. However, with huge US crude stockpiles still awaiting sale, along with a likely rise in Iraqi and Iranian oil, the trend appears to be negative once more.”

Amrita Sen at Energy Aspects attributed some of the selling pressure on Brent to the liquidation of oil floating storage and unsold Nigerian cargoes.

Precious metals market, battered by a stronger dollar, also commenced trading on a calmer footing. COMEX gold was trading up $2.90 or 0.24% at $1,189.40 an ounce well shy of the $1200-level but in calmer waters, having shed $15 overnight at one point. COMEX silver stayed below the $17 level trading up 0.26% or four cents at $16.69 an ounce.

Negativity in the base metals market continues to persist with non-US buyers finding them dearer on a stronger dollar and expectations of a greenback rally. Copper was trading at one-month lows overnight dropping to its weakest level since late April at $6,075 per tonne down 0.4% on the London Metals Exchange.

Meanwhile, aluminium fell to its lowest level since March 2014, down 0.8% at $1,738 a tonne, after Norsk Hydro said it would increase output by 35,000 tonnes per year. Tin, zinc, nickel and lead were all in the red, albeit marginally by less than 0.4% on average.

In the agricultural commodities market, CBOT corn (up 0.50%), wheat (up 0.82%), ICE cotton (up 0.60%) and CME live cattle (up 0.53%) were all in the green, but ICE’s July cocoa contract was trading 0.51% lower at $3,134 per tonne.