Commodities round-up: Oil futures plunge by more than 1.6% on dire UK data

Dire post-Brexit data from the UK and fears regarding wider economic malaise had a negative impact on oil futures on Friday (22 July 2016), while precious metal prices remained lacklustre as profit-taking took hold with the weekend in sight.

At 3:19pm BST, the Brent front month futures contract was down by 1.65%, or 76 cents, to $45.44 a barrel, while the West Texas Intermediate fell by 1.61%, or 72 cents, to $44.03 a barrel.

Earlier in the session, the UK's flash-services sector purchasing managers index (PMI) fell to a level of 47.4 in July from 52.3 in June, marking an 88-month post-Brexit low, according to a Markit/CIPS survey. A score below 50 indicates contraction in the sector.

As the data raised fears of Europe's economic prospects and global demand in general, oversupply of fuels such as gasoline, particularly in Asia, refused to end.

Chinese gasoline exports hit a near-record high of 1.1m tonnes in June, more than double the level of the same period last year, with the country's refiners eager to export in order to reduce their burgeoning inventories, a situation that is likely to continue according to Capital Economics.

Furthermore, oil build-up has seen banks such as Morgan Stanley and Barclays place their respective global demand growth forecasts for the year at 800,000 barrels a day (bpd) and 1.1m bpd respectively, well below the 1.2-1.4m bpd projections currently being maintained by the likes of the International Energy Agency and the Organization of Petroleum Exporting Countries.

Meanwhile, precious metals slid across the board dragged lower by gold. At 3:47pm BST, Comex gold futures contract for August delivery was down 0.62% or $8.20 to $1,322.80 an ounce.

Comex silver futures fell 0.56% or 11 cents to $19.71 an ounce, while spot platinum registered a 1.62% or $17.91 drop to $1,084.84 an ounce. However, the spotlight remained on gold with traders booking profits as the weekend approached.

FXTM research analyst Lukman Otunuga said gold displayed a remarkable rebound from the three week lows at $1,311 an ounce after expectations over future central bank intervention by the European Central Bank provided a foundation for bulls to install a round of buying.

"Bulls are still present and the persistent concerns over the global economy could offer the encouragement needed for gold to trade higher in the future. It should be kept in mind that factors such as central bank caution, depressed stock markets, and post-Brexit uncertainties have boosted gold's allure.

"There could be a possibility that $1,310 is a higher low in the making but prices must break above $1345 for this to be valid. From a technical standpoint, bulls need to conquer $1,345 to be back in the game."