WTI crude futures rose above $83 per barrel on Wednesday, after retreating from over two-month highs in the previous session, fuelled by a larger-than-anticipated drop in US crude stocks. According to API data, US crude inventories fell sharply by 9.163 million barrels for the week ending June 28th, marking the largest weekly draw since early August 2023 and far exceeding market expectations of a 0.15 million barrel drop. Meanwhile, escalating geopolitical tensions in the Middle East raised concerns about oil supply, as Israel continued its siege on Gaza, ordering Palestinians to evacuate Khan Younis ahead of a potential attack. Keeping sentiment in check, Reuters data showed that OPEC's oil output rose for a second straight month in June due to increased production from Nigeria and Iran, countering voluntary supply cuts by other members and the broader OPEC+ alliance.
US natural gas futures fell to a six-week low to $2.45/MMBtu, influenced by increased production, lower demand forecasts, and a surplus of gas in storage. Despite an ongoing heat wave, gas prices declined as analysts highlighted high inventories and rising production. Gas output in the Lower 48 U.S. states averaged 98.8 bcfd in June, up from May's 25-month low of 98.8 bcfd. Gas flows to major US LNG export plants dropped in June due to maintenance at several facilities. Feedgas to the Freeport LNG plant increased after a significant drop, with operations impacted by compressor system issues. Texas's ERCOT noted that peak demand in June nearly set a record, and July demand is expected to break records due to heightened air conditioning use. Hurricane Beryl is expected to affect Mexico's Yucatan Peninsula and the Bay of Campeche, impacting oil production.
Gold held steady near $2,330 per ounce mark on Wednesday after ticking lower in the previous session, as investors digested Fed Chair Powell’s somewhat dovish remarks while awaiting more cues on the Federal Reserve's interest rate outlook. Powell stated on Tuesday that the US is progressively slowing, but more data is needed before cutting rates to confirm that recent lower inflation readings accurately reflect the economy. Meanwhile, US job openings rose in May, surpassing forecasts after sharp declines in the prior two periods, but showing sustained easing in labor market conditions. Investors now look forward to the FOMC minutes due later in the day and Friday’s nonfarm payrolls report. On the geopolitical front, tensions remain elevated in the Middle East as Israel continues its siege on Gaza, ordering Palestinians to evacuate Khan Younis ahead of a potential attack.
Silver prices steadied around $29.4 per ounce on Tuesday after rising for three straight sessions, as investors cautiously awaited the latest remarks from US Federal Reserve Chair Jerome Powell to assess the monetary policy outlook. The metal found some support recently as a soft US PCE inflation reading and weaker-than-expected manufacturing PMI data bolstered hopes that the US central bank will proceed with interest rate cuts this year. However, Fed officials repeatedly called for caution before cutting rates, with Fed Governor Michelle Bowman saying she was open to a further rate increase if progress on inflation stalls or reverses. Meanwhile, investors continued to assess the demand outlook in top silver consumer China after an official report pointed to the second straight month of manufacturing downturn in June. In contrast, a private survey pointed to the fastest pace of manufacturing sector growth in three years.
