Commodity prices experienced mixed movements on Wednesday, with crude oil extending its decline as the impact of the Iran conflict continues to fade, while gold prices rose as investors assessed the outlook for U.S. monetary policy. Aluminium prices hit their lowest level since February.
Crude Oil: Prices Drop Amid Growing Signs of Oversupply
Oil prices continued to fall on Wednesday as the effects of the Iran war receded further with the resumption of shipping through the Strait of Hormuz, adding to mounting evidence of an oversupplied market.
WTI crude declined by 1.3%, settling below $69 per barrel, while Brent crude closed near $72 per barrel. The U.S. President stated that American negotiators had made progress in indirect talks with Iran.
Crude futures extended losses after the U.S. Energy Department's inventory report, which showed a smaller draw in crude stockpiles than the roughly 2 million-barrel reduction previously forecast by the American Petroleum Institute. However, overall supplies remain well below typical levels. Total U.S. crude inventories are at their lowest since September 2018, following a surge in exports that helped fill the gap left by supply losses from the Middle East.
Bearish sentiment continues to dominate the market. The Brent front-month spread remains in contango, a sign of oversupply, while WTI moved closer to signaling an oversupplied market for the first time since November.
Goldman Sachs Group anticipates a supply surplus nearing 2 million barrels per day next year, even accounting for the replenishment of global strategic petroleum reserves post-Iran conflict. Morgan Stanley also warned of an impending oversupply as oil shipments through the Strait of Hormuz recover faster than expected, having lowered its price forecasts twice in about two weeks.
August WTI crude fell 1.3% to settle at $68.58 per barrel. September Brent crude dropped 1.9% to $71.57 per barrel.
Precious Metals: Gold Prices Rise
Gold prices advanced as investors weighed the future path of U.S. monetary policy following remarks from Federal Reserve Chair Kevin Warsh.
Gold climbed as much as 2.7% as the dollar and bond yields pared gains.
Warsh reiterated that he would not provide "forward guidance" on upcoming interest-rate policy. He also noted that price risks have diminished in recent weeks while reaffirming the commitment to bringing inflation back to the 2% target.
"The market is taking some comfort from Warsh sticking to the script, which is boosting gold," said Bart Melek, global head of commodity strategy at TD Securities. "Gold traders were worried his stance might become a bit more hawkish."
Traders will focus on Thursday's nonfarm payrolls data, which may offer clues on the Fed's next potential moves. The government's jobs report is currently forecast to show the U.S. added 115,000 nonfarm jobs in June, which would mark the strongest six-month stretch of job growth since mid-2024.
Spot gold was up 1.4% at about $4,064.41 an ounce as of 3:03 p.m. in New York. The Bloomberg Dollar Spot Index rose 0.2%. Silver gained 2%. Platinum and palladium also moved higher.
Base Metals: Aluminium Hits Lowest Since February
Aluminium prices fell to their lowest since mid-February on Wednesday, pressured by a stronger dollar and easing tensions in the Middle East.
Aluminium dropped 16% in June, its biggest monthly decline since 2008. The winding down of the Middle East conflict is weighing on prices. Aluminium had surged from March to May after the Iran war removed nearly a tenth of global production from the market.
"We've seen a massive collapse in aluminium, back to pre-war levels," said Ole Hansen, head of commodity strategy at Saxo Bank. "It looks like the longs have been squeezed out, exacerbating the move lower."
At the close of London trading, three-month LME copper fell 0.6% to $13,298.50 a metric ton. LME aluminium declined 0.3% to $3,076 a ton. LME zinc dropped 1.5% to $3,499 a ton. LME nickel rose 0.4% to $16,355 a ton. LME tin edged up 0.1% to $51,632 a ton. LME lead fell 0.5% to $1,865.50 a ton.
Comments