Crude oil prices advanced as traders digested multiple geopolitical risks that could add a premium, while continuing to assess U.S. measures to impose controls on Venezuelan oil. London copper closed lower as the dollar hit a two-week high. Silver prices fell for a second consecutive day as investors prepared for the annual rebalancing of commodity indices, which could trigger the sale of billions of dollars in futures contracts in the coming days. Gold prices stabilized.
Crude oil: WTI rose as traders assessed Iran risks and the outlook for Venezuela. Crude oil prices moved higher as traders factored in various geopolitical risks capable of injecting a premium, while simultaneously evaluating U.S. actions to control Venezuelan petroleum.
WTI climbed 3.2%, settling just under $58 per barrel. After the settlement, prices continued to climb, gaining over 1% and positioning to erase losses from earlier in the week.
U.S. President Donald Trump threatened "heavy" strikes against Iran if it killed protesters. A disruption to Iranian oil supplies would present an unexpected obstacle against the current market backdrop of anticipated crude oversupply.
Another bullish factor is the annual commodity index rebalancing, expected to funnel funds back into the oil market in the coming days. Concurrently, the preference for Brent crude call options over puts is strengthening as traders flock to the options market for hedging.
WTI February futures increased by 3.2%, settling at $57.76 per barrel.
Brent March futures settled 3.4% higher at $61.99 per barrel.
Base Metals: London Copper Declined. London copper finished the session lower as the U.S. dollar reached a two-week peak.
According to a recent S&P Global study, the race for artificial intelligence and a surge in defense spending are poised to exacerbate an expected copper supply shortage.
At the close, LME copper was down 1.39% at $12,720.5 per metric ton.
LME aluminum edged up 0.08% to $3,091.0 per metric ton.
LME nickel fell 4.14% to $17,155.0 per metric ton.
LME zinc declined 1.03% to $3,135.0 per metric ton.
Precious Metals: Silver Prices Extended Losses. Silver prices fell for a second straight day as investors braced for the annual rebalancing of commodity indices, a process that could spark the sell-off of billions of dollars in futures contracts in the near term. Gold prices held steady.
After dropping nearly 4% in the previous session, silver fell another 5.5% at one point on Thursday. Passive tracking funds began selling precious metals futures from Thursday to align with the new weightings required by the indices. While this is typically a routine operation, its significance is magnified this year due to the sharp price surges seen in gold and silver last year.
Citigroup estimates that approximately $6.8 billion worth of silver futures may be sold to meet rebalancing requirements, equating to roughly 12% of the open interest on the Comex.
The total outflow from gold futures will also be roughly the same magnitude, according to Citigroup's estimates. These sales are necessary because the weighting of precious metals within the commodity benchmarks has increased substantially.
As of 5:19 PM New York time, spot silver was down 1.52% at $76.9994 per ounce.
Spot gold was up 0.48% at $4,477.65 per ounce.
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