Commodities Round-up: US interest rate hike fears hammer oil and gold futures

Oil and precious metal futures slid into negative territory on Monday (12 September) following renewed speculation that the US Federal Reserve might hike interest rates in September rather than wait until early 2017.

Trailing the equities market lower, the Brent front month futures contract was down 1.29% or 62 cents to $47.39 per barrel at 9:15am BST, while the West Texas Intermediate was 1.55% or 71 cents to $45.17 per barrel.

Ahead of US Federal Reserve's monetary policy committee meeting due on 21 September, Fed Governor Lael Brainard is scheduled to speak at the Chicago Council on Global Affairs, while Atlanta Fed President Dennis Lockhart appears before the NABE conference in Atlanta, and Minneapolis Fed President Neel Kashkari at a question-and-answer session in St. Paul, Minnesota - all on Monday.

Analysts expect hawkish comments from the trio driving Asian and European equities lower, in tandem with much of the commodities market. Meanwhile, oil oversupply fears continued to escalate after the number of US oil and gas, as measured by Baker Hughes, rose for yet another week by 11 to 508 operational rigs.

Analysts at JBC Energy said: "The US crude complex had to absorb another rig count increase – the 11th in 12 weeks, while trading commitments data for the week ending 6 September showed that net length in WTI futures was slashed by more than 47,000 lots versus the prior week.

"The net change was almost exclusively down to a take-up in shorts, the pace of which exceeded that seen during July when net length in the WTI contract was squeezed to a five-month low."

Away from the oil markets, precious metals also took a hit from increased US interest rate hike expectations, with silver bearing the brunt of it following a decoupling of hedging calls. At 9:20am BST, the Comex silver futures contract was down 1.62% or 31 cents to $19.06 an ounce, while gold futures were 0.28% or $3.70 lower at $1,330.80 an ounce.

FXTM research analyst Lukman Otunuga said: "Although [Federal Reserve Chair] Janet Yellen gifted investors the clarity long sought in the Jackson Hole meeting a few weeks back, the conflicting domestic data continues to leave most wondering if anything will be done this year.

"Although there is only a 24% probability that the Fed breaks the tradition of central bank caution in September, the element of surprise has noticeably left investors on edge. If by any chance hawks come out to play then the Dollar bulls could be installed with some inspiration ahead of next week's Fed meeting."