The fever in the commodities market, which started after crude oil was trading at negative levels more than a year ago, seems to be slowing down. This could mean a reduction in the pace of growth or a move to form local corrections.
Crude oil, which was trading at its highest level in three years, seems to have given back some of its gains on Tuesday. Prices fell from the peaks reached during the previous session due to concerns about demand. This is because data showed that China's crude imports fell in May to the lowest level in five months.
Investors are awaiting the outcome of nuclear talks in Iran, which will be held on June 10. The agreement could lead to an increase in the country's oil production by 500,000 barrels. However, many analysts expect that the settlement will not be reached before the presidential elections in Iran, and these will be held next week.
OPEC+, on the other hand, expects oil inventories to fall further in the coming months. This was announced on Monday by OPEC's Secretary General. Last week, OPEC+ agreed to gradually reduce crude supply restrictions.
Since the beginning of the year, the barrel of WTI has risen by more than 40 percent, while on a monthly basis it has gained nearly 6 percent.
A turnaround in metals prices
A slightly worse sentiment also appeared on the gold market, which had two months of growth of about 10 percent. The precious metal seemed to gain thanks to the weakening dollar and deepening negative real interest rates. Now those two factors may be starting to reverse. This means that the dollar may no longer lose value so sharply, and negative real rates will reach their highest values this month due to the base effect in inflation data. On Tuesday, gold was trading below the $1,900 level, which is below 5-month highs.
Market participants are trying to gauge current inflationary pressures, which could provide further clues about the Fed's next steps, which we will learn as early as next week. Meanwhile, Treasury Secretary Janet Yellen reiterated her support for President Biden's $4 trillion spending package and said that higher interest rates would benefit the US.
Silver also appears to be in a weakening uptrend. This market moved in a steady uptrend from late March to mid-May only to lose its momentum more than two weeks ago. In the other industrial metals markets, we can also observe a deceleration of the recent trends: steel prices have declined sharply, while copper prices are in consolidation.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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