Commodities: Oil, metal futures take another tumble

Oil futures endured another torrid session on Thursday, with both Brent and WTI front-month futures heading lower.

The crude market got temporary reprieve overnight as US Department of Energy’s statistical arm – the Energy Information Administration – noted the country's gasoline inventories fell last week, for the first time since November.

Headline EIA data pointed to increase of 3.5m barrels in the last week to a total of 507.6m, compared with analysts' expectations for an increase of 3.4m barrels. Gasoline stocks fell by 2.2m barrels, compared with analysts' expectations for a 1 to 1.1m barrels drop.

Nonetheless, price weakness ensued right from the start of the Asian session, as oversupply concerns returned to dominate market sentiment. At 1715 GMT, Brent was down 1.10% or 38 cents to $34.03 per barrel, while WTI was 1.71% or 55 cents lower at $31.60 per barrel.

Speaking earlier in the week, Saudi Arabia’s Oil Minister Al-Naimi restated his country’s case for “maintaining output” premised on demand picking up excess crude over the medium-term. But Al-Naimi also said there was “less trust” between the big oil powers, making production cuts an unrealistic option, according to a CNBC report.

Analysts at Barclays see further weakness in timespreads and an uphill battle for prompt oil prices over the first half of 2016. “We expect Brent prices to average $33 during this timeframe. US production declines will help reduce the rate of US stockbuilds and will flatten WTI timespreads in the summer months.”

Overnight, Fitch Ratings lowered oil price assumptions it uses to rate energy companies, reflecting its view that prices were “increasingly unlikely” to recover this year.

In a note to clients, the ratings agency said its new base case is for Brent and WTI oil prices to average $35 per barrel in 2016. It had previously expected oil to average $45. However, Fitch’s long-term base case price assumptions remain unchanged at $65.

Away from the oil markets, precious metals saw a largely lacklustre session. The COMEX front-month gold futures contract was flat at $1,239.10 an ounce, while spot gold was up 1.01% or $9.80 to $1,240.36 an ounce.

COMEX silver fell 0.89% or 14 cents to $15.20 an ounce, and spot platinum headed 1.78% or $16.74 lower as well to $921.10 an ounce.

Headline base metal futures were lower across the London Metal Exchange board. At 1635 GMT, three-month futures contracts of nickel (down 1.8%), lead (down 0.1%), tin (down 0.1%), copper (down 0.4%) and primary aluminium (down 0.4%) headed lower.

Liz Grant, senior account executive at Sucden Financial, said, “LME prices were contained within range of yesterday in thin conditions making a slow grind to lower levels, tracking the slide in oil. Trading conditions were choppy as the market seeks clearer directional signals.”

Finally, agricultural commodity futures largely recovered with the exception of CBOT corn (down 1.03%) futures. Other headline contracts, including CBOT wheat (up 0.50%), ICE cotton (up 0.52%), cocoa (up 0.48%) and CME live cattle (up 1.10%), headed higher in early trading calls stateside.