Oil prices edged up on Thursday as traders anticipated greater demand after the US Federal Reserve cut interest rates on Wednesday.
Elsewhere gold prices eased from their record highs due to a stronger dollar. A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers.
Silver and copper prices were also down, following the interest rate decision by the US central bank.
Oil prices rise
On Thursday, oil prices saw a modest increase. This came as traders considered the Fed’s decision to cut interest rates, marking the beginning of a more relaxed monetary policy, alongside ongoing worries about the health of the US economy.
On Wednesday, the Fed reduced its policy rate by 0.25%, signaling further cuts throughout the year.
This decision comes in response to indications of a weakening job market.
Reduced borrowing expenses tend to stimulate oil demand, leading to higher prices.
Following the recent US interest rate cut, Kuwait’s oil minister Tariq Al-Roumi expects an increase in oil demand, especially from Asian markets.
Fed Chair Jerome Powell indicated that while inflation risks require ongoing assessment and management, the risks to employment are increasingly leaning towards the downside.
The market was impacted by a continued oversupply of oil and weak fuel demand in the US, the largest oil-consuming nation.
Meanwhile, US crude oil stockpiles experienced a significant decrease last week.
This sharp decline was attributed to a record low in net imports and a near two-year high in exports, according to data released Wednesday by the Energy Information Administration.
Distillate stockpiles in the US, surprisingly rose by 4 million barrels, exceeding market expectations of a 1 million barrel gain.
This surplus has fueled concerns about demand in the world’s leading oil consumer, subsequently pressuring prices.
“The oil market remains a tricky one to judge,” said David Morrison, senior market analyst at Trade Nation.
But it will be of concern to the bulls that so far, rally attempts have been short-lived and relatively easy to reverse.
At the time of writing, the West Texas Intermediate crude was at $64.42 a barrel, up 0.6%. Brent prices were 0.5% up at $68.27 per barrel.
Gold eases
Gold prices declined on Thursday, despite experts suggesting it would be wise to await further selling before anticipating additional losses.
The yellow metal’s dip from its recent record highs coincided with a sharp increase in the dollar index, which followed the US Fed’s 25 basis point interest rate cut on Wednesday.
This follows comments from Fed Chair Jerome Powell, who indicated no immediate need for rapid rate adjustments.
A positive sentiment in the equity markets is perceived as weakening the appeal of safe-haven commodities.
According to the CME Group’s FedWatch tool, traders are currently pricing in a 90% chance of another 25-basis point cut at the upcoming Federal Reserve meeting in October.
ANZ predicts that gold will perform strongly in the initial stages of the easing cycle.
The bank noted on Thursday that increased investor demand for safe-haven assets, driven by the current geopolitical challenges, is expected to be a contributing factor.
At the time of writing, the December gold contract on COMEX was at $3,701.77 per ounce, down 0.5%. The same-month silver contract was flat at $42.143 per ounce.
Base metals
Copper prices fell in the overnight session due to a more hawkish stance from the Fed, leading to a repricing of borrowing costs.
However, attention may now be shifting to the impact of US tariffs on global economic activity and increasing LME inventories, Neil Welsh, head of metals at FCA regulated multi-asset brokerage Britannia Global Markets, said in a note.
Elsewhere, Chinese zinc producers and traders are looking for opportunities to export zinc.
This comes as global zinc prices have reached their highest point this year, despite challenges in the domestic market.
Zinc prices on the London Metal Exchange (LME) have seen a recent surge, pushing their ratio against prices on the Shanghai Futures Exchange (SHFE) to a two-year high.
Welsh said:
While the gap isn’t quite enough to encourage overseas sales, it’s not far off.
“Major suppliers are preparing for that to happen, analysts and traders said, perhaps by sending material to the LME’s newly opened warehouses in Hong Kong,” he added.
At the time of writing, the three-month copper contract on LME was at $9,960.60 per ton, down 0.4%.
The three-month zinc contract was 0.3% lower $2,931 per ton.
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