Crude oil prices fell to a five-month low on Monday as markets showed increasing signs of a supply surplus. Gold prices moved lower as traders awaited clues on the interest rate trajectory from the Federal Reserve's policy meeting minutes this week. Aluminum prices on the London market rebounded from near four-month lows.
Oil: Prices Hit Five-Month Lows as Supply Glut Signs Intensify
Oil prices dropped to five-month lows after Saudi Arabia made its largest cut to the price of its flagship crude in at least 26 years, the latest signal of an oversupplied international market.
WTI futures settled below $69 per barrel, their lowest level since late February. Brent crude also closed near five-month lows.
The rare price cut for Saudi Arab Light crude further signals intensifying competition as supplies from the Persian Gulf recover.
OPEC+ agreed over the weekend to once again modestly raise its collective oil production quota next month, increasing the target output by 188,000 barrels per day.
While this additional supply remains theoretical, the OPEC+ decision indicates the group's willingness to further increase production as market conditions continue normalizing.
Brent crude plummeted 30% in the second quarter after a temporary peace agreement between the U.S. and Iran paved the way for a swift resumption of shipping through the Strait of Hormuz.
Several Wall Street banks anticipate further downside for oil prices in the second half of the year, with Citigroup forecasting Brent could fall to $60 per barrel by year-end.
WTI for August delivery edged lower, settling at $68.55 per barrel.
Brent for September delivery fell 13 cents to settle at $71.99 per barrel.
Precious Metals: Gold Prices Decline
Gold prices fell on Monday as traders assessed the outlook for the Federal Reserve's interest rate path at the start of the week. The minutes from the Fed's last policy meeting, scheduled for release this week, are expected to reveal the thinking of rate-setters.
Gold prices fell as much as 1.1% before paring losses. Following last week's weaker-than-expected jobs data that eased rate hike expectations, swap markets still imply a 25% probability of a Fed rate hike in July.
"The gold trader is still not convinced about the short-term direction, and the specter of rate hikes is still hanging over the market," said Ole Hansen, head of commodity strategy at Saxo Bank. "I think the risk of a hike is close to zero, but as long as the market continues to price that risk in, the upside potential is capped, and the market at best will continue to consolidate."
Spot gold was down 0.4% at $4,159.01 per ounce as of 3:16 p.m. in New York. Silver fell 0.63%. Platinum moved lower while palladium gained.
Base Metals: Aluminum Prices Advance
Aluminum prices rebounded from near four-month lows, even as Goldman Sachs Group warned that supply recovery from Middle Eastern smelters is happening faster than expected.
Aluminum on the London Metal Exchange rose 0.8% to settle at $3,115.50 per metric ton. Aluminum's 14-day relative strength index also recently entered oversold territory, suggesting to some that a price rebound could be imminent.
Aluminum producers' margins surged in the second quarter as prices rallied following Middle Eastern supply disruptions. However, that rally reversed as the market focus shifted to supply recovery in the region following the U.S.-Iran peace deal. Last week, Emirates Global Aluminium, the region's largest producer, said it plans to accelerate the restoration of output at its Abu Dhabi plant damaged during the U.S.-Iran conflict.
Goldman Sachs lowered its price forecast for aluminum. Analysts led by Lavinia Forcellese said in a report, "The latest industry feedback also shows Middle East supply recovery is happening faster. We expect inventories to rebuild and persist through 2027, driving smelter margins back to normal from recent highs."
Other metals on the LME were mixed. Copper settled 0.3% higher at $13,403.50 per ton, while lead fell 0.6%.
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