WTI Bounces Back Above $90 From Multi-month Lows; Copper Gains 1.0%

Key Points

• WTI bounced back above $90 on Monday, aided by solid Chinese import figures.
• Copper was also helped by Chinese import data, as well as a generally risk-on tone and slightly weaker buck.  
• Gold prices rallied back towards recent highs as US yields (real and nominal) fell.

WTI Bounces Back Above $90 From Multi-month Lows

Front-month futures of the US benchmark for sweet light crude oil, West Texas Intermediary of WTI, rallied from the more than four-month lows it hit last Friday on Monday. WTI ended the session around $90.50 per barrel, up around $2.0 on the day and up over 3.0% from intra-day lows in the low-$87.0s.

Strong Chinese oil import figures for July gave global oil prices some modest support on Monday. The world’s second-largest economy and consumer of oil saw its daily imports recover to about 8.79 million barrels per day in July after hitting a four-year low in June. However, with Chinese cities still in and out of stop/start lockdowns, July imports were still down about 9.5% YoY.

Some traders cited last week’s strong US data as also boosting optimism about the US demand outlook and supporting prices on Monday, though if last week’s US crude oil inventories, a much better guage of US demand, are anything to go by, this optimism could be somewhat misplaced.

By and large, WTI remains in the same downtrend that has seen it pull all the way back from June highs in the low $120s. Technicians continue to target a near-term test of support in the $85 area.

Copper Hits New One-month Highs

CFD’s that track copper’s spot price rose 1.0% on Monday to hit fresh one-month highs above $3.60. Risk appetite was mostly upbeat on Monday, with European equities making strong gains and US equities hitting fresh multi-week/month highs (before pulling back to end mixed), supporting the risk-sensitive metal.

Copper was also supported by a slightly weaker US dollar, though analysts questioned how much further the dollar can weaken in the near-term given the backdrop of strong US data and increasingly hawkish Fed tightening expectations. The aforementioned Chinese trade figures showed solid copper imports, also likely helping support prices somewhat.

Imports were up over 9.0% YoY in July, with the recent pullback in prices from earlier highs this year in the $5.0 area having prompted dip-buying. Traders are also monitoring dwindling warehouse stocks in China and London, with Reuters on Monday reporting that warehouses monitored by the Shanghai Future Exchange reported copper stocks down 79% since March and at their lowest level since late January.

Gold Rallies as US Yields Pull Lower

US real and nominal yields both pulled lower across the curve on Monday, after jumping in wake of last Friday’s strong US jobs data. This helped support a rally in rate-sensitive gold prices, which ended Monday’s session just under $1,780 and back close to recent highs in the $1,790s. Upcoming US Consumer Price Index data on Wednesday will be the key event for gold this week, with a downside surprise likely to boost prices if it results in a pullback in Fed tightening bets and vice versa.

But analysts think that gold’s near-term upside potential could be limited given 1) last week’s strong US data suggesting the economy remains strong at the start of Q3, reducing the demand for safe havens like gold and 2) the recent hawkish tone of Fed policymakers, who seem intent to keep their foot on the policy tightening gas until they see a trend of falling inflation emerge (which could arguably take at least a few more months).