Oil prices were largely flat in thin trading as restored shipments from the Persian Gulf created a new supply glut in a key global market region. London copper futures rose on Friday, tracking minor currency movements. Spot gold headed for its first weekly gain since May as traders dialed back expectations for Federal Reserve interest rate hikes.
Oil Markets: Prices Steady as Persian Gulf Flows Near Pre-Conflict Levels
Crude prices held steady in subdued trading, with the resumption of oil transport from the Persian Gulf creating a fresh supply surplus in a critical global market area.
A survey indicated OPEC's June daily crude output increased by 234,000 barrels, with the rise primarily coming from Kuwait, Saudi Arabia, and Iran as Gulf members resumed exports via the Strait of Hormuz. Saudi exports have surged to 90% of pre-conflict levels, with a similar rebound seen in UAE shipments. Iraq, one of the nations hardest hit by the crisis, is finally showing signs of recovery, while significant volumes of Iranian crude are accumulating at sea.
Concurrently, the U.S. and Iran have held constructive talks in Qatar, aiming to transform a 60-day provisional ceasefire into a lasting resolution.
Brent futures traded just above $72 per barrel, while WTI was below $69, with market activity dampened by the U.S. Independence Day holiday. Both benchmark crudes have erased their war-related gains and recorded their largest quarterly declines since 2020.
Brent's prompt time-spread has been in a bearish contango structure for most of the week, with the front-month contract trading at a discount, signaling oversupply. Citigroup analysts project the global benchmark could fall further to around $60 per barrel by year-end.
"With the Strait of Hormuz disruption fading, fundamentals are rapidly reasserting dominance," while "shipping flows are normalizing," analysts including Francesco Martoccia and Eric Lee at Citigroup wrote in a July 2 report. "We continue to advise selling into any summer rally, expecting Brent around $60-$65 per barrel towards year-end."
On the other hand, technical indicators suggest the selling pressure may have run its course. Brent's 14-day Relative Strength Index has dipped below 30, indicating futures may be oversold.
"The U.S.-Iran negotiation process remains fragile, with disputes over management and transit fees for the Strait of Hormuz ongoing," the Citigroup analysts noted.
In an interview, former U.S. President Donald Trump stated that negotiations with Iran were ongoing and claimed Iran had "pretty much agreed to everything we need."
According to informed sources, diplomats proposed unfreezing billions of dollars of Iranian funds held overseas in exchange for Tehran dropping its claims and fee demands related to the Strait of Hormuz, but Iran has not conceded.
Brent crude for September delivery rose 0.4%, settling at $72.12 per barrel.
WTI crude for August delivery was at $68.78 per barrel.
No settlement was recorded Friday due to the U.S. holiday.
Copper Tracks Dollar Movements as Traders Assess Rate Outlook
London copper futures advanced on Friday, mirroring slight fluctuations in the U.S. dollar as investors continued to evaluate the prospects for American monetary policy.
Copper on the London Metal Exchange settled 0.3% higher, having risen as much as 0.9% during the session. The Bloomberg Dollar Spot Index touched a two-week low before paring some losses.
In June, the dollar strengthened on signals policymakers would tighten monetary policy, pressuring copper and other metals. However, rate hike bets receded this week after Federal Reserve Chair Kevin Warsh indicated on Wednesday that price risks were diminishing.
Higher interest rates increase borrowing costs for manufacturers, acting as a headwind for metal demand, while a stronger dollar makes commodities like copper more expensive for buyers using other currencies.
"The pullback in the dollar following lower oil prices and weaker U.S. jobs data is positive for copper," said Li Xuezhi, head of research at Chaos Ternary Futures. "But persistent softness in traditional industries will cap copper's upside."
LME three-month copper rose 0.3% to $13,366.50 a metric ton.
LME aluminum was little changed at $3,090.50 a ton.
LME nickel gained 1.1% to $16,424 a ton.
LME zinc advanced 1.6% to $3,541 a ton.
LME tin climbed 3.3% to $52,628 a ton.
LME lead increased 0.9% to $1,891.50 a ton.
Gold Heads for First Weekly Rise Since May on Easing Rate Bets
Spot gold is on track for its first weekly gain since May as traders reduced their expectations for Federal Reserve interest rate increases.
The gold price rose, approaching $4,200 per ounce, with a weekly advance of 2.2%. Soft U.S. employment data and declining energy prices prompted investors to scale back bets on monetary policy tightening, which typically weighs on non-yielding assets like gold.
"Lower energy prices and slowing job growth suggest inflationary pressures may ease in the coming months," said Bart Melek, global head of commodity strategy at TD Securities, in a report.
He stated that diminished Fed rate hike expectations could prompt traders to cover previously established short positions in gold while also reducing their incentive to unwind long positions, which may explain the metal's rise over recent days.
"We believe gold may only test resistance around $4,280 per ounce at most," Melek said. He added that with inflationary pressures still lingering, the $5,300 per ounce target for gold is not expected until next year.
As of 2:31 p.m. New York time, spot gold was up 1.3% at $4,176.94 per ounce.
Silver gained 2% to $62.42 per ounce, following a 5% rally over the prior three trading sessions.
Platinum and palladium prices also moved higher.
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