Commodity Roundup: Brent drops over 1%; copper hits 1-week high, set for weekly gain

Brent crude (CO1:COM) prices were down -1.14% to $81.92 a barrel on Friday as forecast of slowing demand by the International Energy Agency countered support from Middle East tensions.

The IEA said on Thursday that global oil demand growth was losing momentum, and it trimmed its 2024 growth forecast, in contrast to the view held by the Organization of the Petroleum Exporting Countries (OPEC). JPM Commodities Research in a note said, despite heavy US turnarounds, global refining utilization rates have stayed surprisingly high. “This has flat-footed the market that expected low runs, weak product cracks and rising crude inventories in 1Q.” Brokerage anticipates product cracks to remain elevated at least through 3Q24.

JPM further said, the attacks on ships in the Red Sea are beginning to have a disproportionate impact on energy prices in Europe. “Although not a single barrel of oil has been lost so far, the impact of disruptions in the region is now becoming visible in refined product flows into Europe and regional product differentials.

“Gold prices (XAUUSD:CUR) were headed for a second straight weekly fall as investors reassessed their expectations of the scale of rate cuts by the Federal Reserve this year, weighing on the appeal of non-yielding bullion. However, prices held steady +0.13% at $2,006.61 an ounce by 6 am ET on the day, following softer U.S. economic data. Federal Reserve Bank of Atlanta President Raphael Bostic said there’s no rush to cut interest rates with the US labor market and economy still strong, and cautioned it’s not yet clear that inflation is heading sustainably to the central bank’s 2% target.

According to the CME Fed Watch Tool, traders now see a 78% chance of a rate cut in June. The market now awaits another inflation report – the U.S. producer price index – due at 1330 GMT.

Among base metals, zinc, nickel, aluminum prices traded in green, while copper hit a one-week high on Friday as weaker-than-expected U.S. retail sales data raised hopes for an interest rate cut from the Federal Reserve in June. Copper is set for a weekly gain, but down nearly 3% this month on concerns about demand from top consumer China and its property sector in particular, though activity is muted this week as China celebrates the Lunar New Year. Three-month copper on the London Metal Exchange hit its highest since Feb. 8.

ING analyst Ewa Manthey writes, the struggling property sector – the pillar of commodities demand – continues to weigh on sentiment and is likely to remain weak throughout 2024. “This suggests that there will not be a significant recovery in metals demand this year. The low level of housing starts will continue to weigh on industrial metals demand looking further ahead, given the lag between starts and metals usage.”

Elsewhere, among agriculture commodities, cocoa and wheat prices fell, while wheat gained.