Oil prices hold below $60 a barrel

Commodity prices fell across the energy and metals markets on Tuesday as concerns about slowing demand growth for oil, and predictions of metal supplies outpacing demand next year, dragged prices lower.

IPE Brent for December delivery rose 27 cents to $58.37 a barrel by the close of London trade, shoring up its slide from the previous session.

December Nymex West Texas Intermediate gained just 9 cents to $59.85 a barrel, with the US benchmark spending its second consecutive day under $60 for the first time in three months.

The WTI contract has dropped 16 per cent since reaching its peak of $70.85 on August 30.

The Department of Energy said this week that US retail petrol prices had fallen by their fastest rate ever. The fall in petroleum product prices has also seen refiner margins shrink with US petrol margins now at about $7 a barrel, versus more than $30 two months ago.

Gold also fell. Bullion traders said gold had been following oil of late because higher energy prices have been the key driver of inflation fears.

The precious metal fell more than $5 to $359.50/$460.30 a troy ounce in late London trade, down from its late quote in New York on Monday, but above a five-week low of $458.20 touched yesterday.

The decline in gold prices came ahead of an expected rise in US interest rates, which is likely to support the dollar and be more bearish for gold and commodities as the cost of risk will rise.

Base metal prices were also weaker. The three-month copper price dropped $12.50 to $3,912 a tonne on the London Metal Exchange, following comments by the chief executive of the world’s largest copper producer that he expected surpluses of the red metal next year after two years of production shortfalls.

Juan Villarzu, chief executive of Codelco, the Chilean state-owned group, told Reuters that the copper surplus would grow to 300,000 tonnes in 2006, while cash copper prices would fall over the next three years to a more sustainable $2,200-$2,400 a tonne.

Aluminium, lead, nickel and zinc prices were down, with the latter falling from an eight-year high set on Monday.

The three-month LME zinc price eased $17 at the close of open outcry trading to $1,527 a tonne. Zinc hit $1,565, its highest level since August 1997.

The fall in the zinc price came in spite of a forecast of a larger production shortfall of the metal next year from the International Lead and Zinc Study Group.

The ILZSG said the global deficit in the zinc market is expected to rise to 430,000 tonnes in 2006, driven by increasing demand in China.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.