WTI Rallies Nearly $3.0 Amid Risk-on Market/Bullish IEA Demand Forecast; Gold Falls 0.3% on Rising US Yields

Key Points

• WTI rose nearly $3.0, with prices boosted amid the market’s risk-on tone and by the IEA’s bullish oil demand forecast.
• Copper prices hit new six weeks highs, supported amid positive Chinese and US data plus falling inventories.
• Gold prices were weighed amid further upside in long-term US bond yields, dimming the appeal of the non-yielding precious metal.

WTI Rallies Amid Risk-on Market Tone, Bullish IEA Oil Demand Forecast

Front-month futures prices of the US benchmark for sweet light crude oil, West Texas Intermediary or WTI, rallied nearly $3.0 on Thursday, with sentiment bolstered by a (mostly) risk-on tone to global macro trade after further data out of the US alluded to price pressures having peaked. This further eased concerns about excessively aggressive US Federal Reserve tightening in the coming quarters and helped solidify a 50 bps rate hike as the market’s base case from the Fed at its September meeting (as opposed to a 75 bps hike).

Prices got a further boost from the International Energy Agency’s (IEA) monthly oil market report, in which it increased its oil demand growth forecast for 2022 by 380,000 barrels per day (BPD) given increased so-called switching to oil as a fuel source from natural gas. Natural gas prices in Europe have surged in the last 12 months amid Russia’s invasion of Ukraine, exerting upside pressure on prices in the US as well.

OPEC also released its monthly oil market report on Thursday. Despite lowering their oil growth demand forecast by 260,000 barrels per day, OPEC still sees demand increasing by 3.1 million BPD in 2022, which is higher than the IEA’s forecast.

Copper Hits New Six-week Highs as Yield Rally Pressures Gold

Despite the US dollar paring intra-day losses and US equities paring earlier gains to finish the day closer to flat, copper prices look set to end Thursday’s session with solid gains. Spot prices were last changing hands in the $3.7000 area and just off fresh six-week highs printed earlier in the day. On the day, prices are up 1.5%, taking gains since the start of the week to around 4.0%.

Analysts cited a few copper-specific factors as supporting the price action, including 1) falling copper stockpiles in China and London, 2) Chinese inflation data this week supporting the case for ongoing stimulus from the PBoC and 3) further data on Thursday suggesting US price pressures have now also peaked, reducing hawkish Fed risk.

Meanwhile, gold prices were pressured by a sharp bounce in long-term US bond yields to fresh multi-week highs, which served to dim the appeal of the non-yielding precious metal by raising its “opportunity cost”. US yields rallied on Thursday after traders interpreted recent soft US inflation data as reducing the risk that the Fed tightens financial conditions too quickly and sends the US economy into recession.