Oil
- Donald Trump has signaled a resumption of arms supplies to Ukraine, citing Russia’s reluctance to engage in peace talks. However, the financial burden for this American weaponry is expected to be borne by the entire NATO alliance.
- Trump also announced the potential imposition of 100% secondary tariffs on Russia should a ceasefire not be expedited. These tariffs, which would target Russia’s trading partners, are typically far more punitive than standard tariffs, often leading to a widespread withdrawal of commercial engagement. Venezuela’s experience with secondary tariffs serves as a pertinent example.
- Trump specified that these tariffs would be implemented if a ceasefire or peace agreement is not reached within 100 days.
- The oil market’s reaction to these announcements has been somewhat counterintuitive, with a notable price decline despite the potential for a significant reduction in global supply from one of the largest producers.
- Currently, the largest purchasers of Russian oil are China, India, and Turkey.
- Russia presently exports approximately 7 million barrels per day (mbd), and the removal of the majority of this volume from the market would tip the market into deficit. The spare production capacity of OPEC countries would be insufficient to offset such a shortfall.
- Recent data points to a seasonal rebound in demand, not only in the United States but also in China. China’s crude oil imports (land and sea) rose to 12.2 mbd in June, a 7% increase year-on-year and a 10% increase from the previous month.
The oil market’s oversupply has recently been significantly reduced, attributed to strong demand and a slower increase in supply than indicated by official OPEC+ production restoration. Source: Bloomberg Finance LP, XTB
Inventories no longer suggest such a clear undervaluation of crude oil prices. Source: Bloomberg Finance LP, XTB
The 5- and 10-year seasonality indicates a period of consolidation with relatively high volatility. Conversely, long-term seasonality suggests that we should be in a growth phase. All seasonality trends point to a local peak at the end of October. Source: Bloomberg Finance LP, XTB
Gold
- Gold has been in a consolidation phase for almost three months since reaching its historical highs on April 22.
- A very similar consolidation occurred in 2024, when previous historical highs were also achieved in October.
- It is worth noting that the 25- and 50-period moving averages in 2024 behaved very similarly to the current situation.
- The ongoing diversification of central bank reserves and increased gold allocations currently lend support to gold prices.
- The market also anticipates increased uncertainty associated with impending reciprocal tariffs.
- Furthermore, there has been an observed increase in speculative long positions in gold and a rise in call options for the GLD ETF.
Long positions in gold continue to grow, although these increases are relatively small compared to previous upward movements in the gold market. Source: Bloomberg Finance LP, XTB
Sentiment in gold is improving, as evidenced by options on the widely known GLD ETF. Source: Bloomberg Finance LP
Gold has been in a nearly three-month consolidation, similar to the end of 2024. Source: xStation5
Silver
- Silver prices have recently begun to rise sharply, a movement largely attributed to global tariff risks. The primary suppliers of silver to the US are Mexico and Canada.
- Under the USMCA, silver is exempt from tariffs, yet the possibility of 30-35% tariffs on Canada and Mexico remains a significant risk.
- Silver surged to $39 per ounce at the start of the week, reaching its highest level since 2011.
- Following consolidation in the gold market, gold appears poised for renewed gains, which could also fuel the broader precious metals market.
- Proposed 50% tariffs on copper could reduce the incentive for new mining projects. It is important to note that a significant portion of silver is extracted alongside other metals, primarily copper. A lack of new investment could therefore imply a constrained outlook for future silver supply growth.
The gold-to-silver price ratio is clearly declining, heading towards its 10-year average of around 80-81 points. This suggests that silver still has upside potential at current or higher gold prices. Source: Bloomberg Finance LP, XTB
Silver has gained similarly to its 5-year maximum performance since the beginning of this year. In 2020, strong gains in the silver market occurred precisely during the summer. Source: Bloomberg Finance LP, XTB
We are also seeing a surge in demand from ETF funds, which have been purchasing significant amounts of silver recently. Source: Bloomberg Finance LP, XTB
However, it’s worth noting that speculators have recently reduced long positions in silver. The number of short positions remains extremely low. Source: Bloomberg Finance LP, XTB
Natural Gas
- Natural gas prices continue the upward trend that began last week, testing the $3.5/MMBTU level amid rising temperatures across the United States.
- The outlook for the next two weeks indicates significantly higher temperatures across nearly the entire US.
- US natural gas production at the beginning of this week was 107.2 billion cubic feet per day (bcfd), up 3% year-on-year. Demand, conversely, stood at 76.7 bcfd, nearly 5% lower than the same period last year. LNG exports reached almost 16 bcfd, up nearly 6% from the previous week.
- The most recent inventory change report showed a lower-than-expected increase, aligning with the 5-year average. Inventories are approximately 6% lower than last year but 6.1% higher than the 5-year average.
- The latest Short-Term Energy Outlook (STEO) from the EIA indicates that inventories at the end of the replenishment season will be marginally lower than last year but higher than the 5-year average.
- The EIA anticipates that the spot price will average $3.4/MMBTU throughout the third quarter, slightly below current prices. This represents a 16% reduction in the forecast compared to the previous month.
- The EIA highlights that key factors for natural gas will be production, which remains at a very high level, and LNG exports. The EIA notes a significant risk of a slowdown in LNG exports due to hurricane season, which could ultimately lead to higher inventories.
Gas consumption by power plants is slightly higher than average, but still far from 5-year highs. Source: Bloomberg Finance LP, XTB
The EIA indicates that at the beginning of the heating season, inventories will be only marginally lower than last year. Source: EIA
Comparative inventories recently suggested an overvaluation of prices. However, it is worth noting that comparative inventories stopped rising dynamically in the latest reading. Source: Bloomberg Finance LP, XTB
Seasonality indicates that we should be in the initial phase of a summer rally. Source: Bloomberg Finance LP, XTB
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