Commodity wrap: oil rebounds on sanction fears, gold holds highs, silver tops $45/oz

Oil prices were on track for its biggest weekly gain in three months, while gold eased from its record highs touched earlier this week. 

Silver prices on COMEX breached the $45 per ounce mark for the first time since 2011.

Silver prices have replicated strong gains since the start of the year, mimicking the rally in gold. 

Copper prices on the London Metal Exchange fell on Friday as traders assessed the supply situation. 

Oil recovers

Even though oil prices were slightly down on Friday, the benchmark contracts of West Texas Intermediate and Brent recovered the losses suffered earlier this week. 

“The main factors driving up prices are concerns about tougher sanctions against Russia and fears of major production and supply disruptions as a result of increasingly targeted Ukrainian attacks on Russian energy infrastructure,” Barbara Lambrecht, commodity analyst at Commerzbank AG, said. 

Russia announced on Thursday a partial ban on diesel exports until the end of the year, alongside an extension of an existing ban on gasoline exports. 

Deputy Prime Minister Alexander Novak attributed these measures to a decline in refining capacity, which has led to shortages of specific fuel grades in several Russian regions.

Separately, ANZ analyst Daniel Hynes noted that NATO's warning regarding further airspace violations has intensified tensions stemming from the conflict in Ukraine. 

This development, Hynes suggested, raises the possibility of additional sanctions being imposed on Russia's oil industry.

“If in addition sentiment indicators in the major oil-consuming regions – China, the US, and Europe – stagnate, the oil price is likely to fall back to the middle of its trading range between USD 65 and USD 70, which has been in place since August,” Lambrecht further said. 

At the time of writing, the WTI contract was at $65.40 per barrel, down 0.4%. Brent was at $69.51 a barrel, up by 0.1%. 

Bullion rises

Gold prices were in the green and were hovering around its record levels touched earlier this week. 

On Thursday, data indicated a faster-than-estimated growth in the US economy during the second quarter, accompanied by a decline in weekly jobless claims.

Investors have revised their expectations for interest rate cuts, with the probability for October now at 87% (down from 91%) and for December at 62% (down from 76%), according to the CME FedWatch Tool. 

Gold thrives amid low interest rates and geopolitical or economic instability. 

Meanwhile, US President Donald Trump's announcement of new tariffs on imported drugs, trucks, and furniture, effective October 1, highlights current trade uncertainties.

At the time of writing, the silver contract on COMEX was at $45.688 an ounce, up 1.2%. 

This year, silver has surged by approximately 56%, surpassing gold's 44% gain.

In the past month alone, it increased by 15%.

“We have pointed this out many times: there are no (new) fundamental reasons for the sharp rise in prices,” Thu Lan Nguyen, head of FX and commodity research at Commerzbank, said in a report. 

Base metals

This week saw an increase in base metal prices, pushing the London Metal Exchange index to a 12-month high.

This was mainly due to the jump in the price of copper, which benefited from ongoing production outages at the world's largest copper mine in Indonesia.

China's continued subdued business sentiment, its most important market, should somewhat alleviate supply concerns, given the less-than-optimistic demand outlook.

Given recent developments in the copper market, the upcoming forecasts from the International Study Groups are highly anticipated. These will be published in the week after next.

At the time of writing, the three-month copper contract on LME was at $10,259.50 per ton, down 0.74% from the previous close. 

The declaration of force majeure on contracted supplies by the operator of Indonesia's key Grasberg mine caused a nearly 5% temporary surge in copper prices this week. 

According to Commerzbank analysts this highlighted the precariousness of market sentiment regarding supply stability.