Oil prices continued to decline on Tuesday as increased tanker traffic through the Strait of Hormuz followed a provisional U.S.-Iran agreement. Widespread selling across global financial markets also pressured metal prices, with gold falling towards $4,000 per ounce and base metals broadly lower in London.
Oil: Prices Drop as Strait of Hormuz Traffic Increases
Crude oil prices fell on Tuesday as tanker movements through the Strait of Hormuz became more frequent, signaling the long-awaited influx of substantial crude volumes into the market.
WTI crude declined less than 1%, settling above $73 per barrel. The global benchmark Brent crude dropped about 1% to around $77 per barrel. Prices have fallen sharply since the U.S. and Iran signed an interim peace pact last week, pledging to reopen the Strait of Hormuz. Current prices are roughly 40% lower than at the peak of the conflict.
More vessels are now transiting the strait with their satellite signals active. India has sent two ships back to the region for the first time since February. The International Maritime Organization stated it has received security assurances that would allow hundreds of ships to leave the Persian Gulf.
Joe DeLaura, Global Energy Strategist at Rabobank, said, "The simple fact is that flows through the Strait of Hormuz are recovering, and strategic petroleum reserves continue to release oil to the market, which will weigh on prices in the near term."
News on Monday that the U.S. issued a 60-day license allowing the sale of some Iranian oil and petroleum products also weighed on prices.
August WTI crude fell 0.9% to settle at $73.21 per barrel.
August Brent crude declined 1.1% to $77.08 per barrel.
Precious Metals: Gold Falls, Silver Plunges
Gold moved towards $4,000 per ounce on Tuesday amid broad-based financial market selling, while silver plunged as much as 5.8%.
As technology stocks led global equity markets lower, the gold price fell as much as 2.4% to around $4,091, nearing the lows touched earlier this month.
Although gold is considered a safe-haven investment, it often declines during widespread financial sell-offs as investors reduce holdings to cover losses in other assets within their portfolios. Gold last traded below $4,000 in November.
Deutsche Bank analyst Michael Hsueh said in a report, "The repricing of Fed policy, coupled with resilient U.S. macro data, has played a major role in driving gold lower." The bank lowered its third-quarter gold price forecast to $4,300, more than a fifth below its prior view, and cut its forecast for the final quarter of the year to $4,800.
Goldman Sachs Group last week cut its year-end gold price forecast by $500 to $4,900, as the bank now expects the Federal Reserve will not cut interest rates this year.
Spot gold was down 1.9% at $4,111.57 per ounce as of 4:13 p.m. New York time. Silver fell 5.3% to $61.63. Platinum and palladium also declined, while the Bloomberg Dollar Spot Index rose 0.4%.
Base Metals: Industrial Metals Fall Across the Board in London
LME copper fell 2% to $13,371 per metric ton.
LME aluminum declined 3.9% to $3,232.5 per metric ton.
LME zinc dropped 3.2% to $3,492 per metric ton.
LME nickel fell 3.3% to $17,172 per metric ton.
LME tin plunged 5.6% to $51,154 per metric ton.
LME lead decreased 1.5% to $1,934 per metric ton.
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