Commodity Research Evening Track by Kotak Securities Ltd
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Oil tumbles 5% on easing supply concerns and fears of glut
Comex Gold remained relatively stable to trade moderately positive near $2,672 an ounce well supported by geopolitical tensions and safe-haven demand but a stronger U.S. dollar and Treasury yields limit significant gains. Investors await clarity on future U.S. interest-rate cuts, with recent economic data suggesting a smaller rate cut before the year-end. Upcoming U.S. retail sales, industrial statistics, and unemployment claims will be closely watched.
WTI Crude Oil plunge about 5% to trade near $70 a barrel after news that Israel might avoid targeting Iran's crude infrastructure that eased concerns about a major supply disruption and shifted attention to the International Energy Agency's forecast of a significant oil glut early next year. Israel stated it was considering US warnings against attacking Iran's energy facilities but would make its own decisions. While tensions remain a threat to regional energy infrastructure, the IEA predicted an oil surplus in early 2025 due to reduced demand growth and abundant spare capacity within OPEC+.
LME base metals continue to experience a decline amid concerns about the effectiveness of China's government stimulus measures in boosting demand. The selloff in base metals mirrored a broader downturn in Chinese financial markets, with stocks and currency also weakening. This volatility in commodities markets reflects investor uncertainty regarding China's ability to reignite economic growth despite its policy announcements. LME Copper, aluminum and zinc all fell by more 1% as sentiment across China’s financial markets turned sour again.
European natural gas prices plummeted following a report suggesting Israel might avoid targeting oil and nuclear facilities in its retaliation against Iran eased concerns about potential supply disruptions. Israel initially expressed willingness to prioritize military targets, it later clarified that its decision would be based on its own assessments. A potential escalation in the Middle East conflict could disrupt energy supplies to countries like Egypt, increasing global competition for gas cargoes.
Today, investors would be looking for the Empire State Manufacturing Index, a leading indicator of economic health. There is speech of Fed Member Daly and Kugle.
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