Commodities wrap: oil jumps on geopolitical tensions, gold consolidates near highs

Most commodity prices were in the green on Friday with crude oil rising more than 1% due to geopolitical tensions in the Middle East and Ukraine. 

Gold prices continued to consolidate near all-time highs as the market waits for next week’s US Federal Reserve policy meeting. 

Elsewhere, copper prices on the London Metal Exchange surpassed the $10,000 per ton mark once. Traders would be keen to see whether the red metal can defend its gains and remain above the crucial price point in the coming days. 

However, analysts believe that next week’s Fed meeting is a “double-edged” sword for copper and base metals prices. 

Meanwhile, silver prices on COMEX were nearing the $43 per ounce mark on Friday as optimism over interest rates cuts grew.

Oil prices jump 1%

Both oil benchmarks rose more than 1% earlier in the day as supply fears gripped the market. 

A drone attack targeted Russia's Primorsk port, a major oil and fuel export terminal in the country's northwest. The Friday attack resulted in a vessel and a pumping station catching fire, according to the regional governor.

Meanwhile, on the supply side, India's Adani Group, the nation's largest private port operator, has reportedly banned tankers under Western sanctions from all its ports. 

This move could impact Russian oil supplies. India is the largest importer of Russian seaborne oil, much of which is transported on tankers sanctioned by the European Union, the US, and Britain.

The International Energy Agency (IEA) reported on Thursday that global oil supply is projected to increase more rapidly than anticipated this year. 

This accelerated growth is attributed to planned output increases by OPEC+, a group consisting of the Organization of the Petroleum Exporting Countries and allies like Russia.

Conversely, OPEC's own report, released later the same day, maintained its relatively high forecasts for oil demand growth for both the current year and the next. 

OPEC's assessment suggests that the global economy is sustaining a robust growth trend.

At the time of writing, the price of West Texas Intermediate crude oil was at $63.22 per barrel, up 1.4%, while Brent oil was up 1.6% at $67.43 per barrel. 

Gold consolidates

Gold prices edged higher on Friday, nearing the record high reached earlier in the week. 

This increase was driven by a weak US labor market, which has solidified expectations of multiple interest rate cuts this year, consequently bolstering demand for gold.

Undoubtedly, next week's focus in the precious metals markets will be on the US Federal Reserve meeting. A 25 basis point interest rate cut is already priced in.

“However, there is a residual risk that the Fed will take an even more aggressive step of 50 basis points,” Thu Lan Nguyen, head of FX and commodities research at Commerzbank AG, said in a report. 

“This is supported by the significant slowdown in the labor market on the one hand and the continuing high political pressure on the other,” she added.

On Wednesday, US President Donald Trump once again urged Federal Reserve Chairman Jerome Powell to reduce benchmark interest rates.

Can copper defend its gains?

“For base metals, meanwhile, the Fed meeting is a double-edged sword,” Nguyen said. 

A highly dovish meeting could lead to base metal gains, as the prospect of significant interest rate cuts improves the medium-term economic outlook, she said.

“This is likely to limit the upside potential for prices,” Nguyen noted. 

Upcoming industrial production figures from China are keenly awaited. Should August's aluminum production, which has hovered near record highs, indicate a slowdown, it could further bolster aluminum prices.

Simultaneously, an increase in canceled LME warrants for the metal suggests growing Asian demand.

Next week, data on Chinese copper production will not be released. Instead, only the overall figures for total metal production will be published.

At the time of writing, the three-copper contract on LME was at $10,084.40 per ton, up 0.2% from the previous close.