Crude Oil Jumps after U.S. Secretary of State Pompeo’s Remarks on Iran Strategy
U.S. Treasury Secretary Steven Mnuchin set in motion a series of moves in the commodity markets on Monday when he declared the U.S. trade war with China “on hold” following an agreement to drop tariff threats that had roiled global markets this year.
Copper futures jumped to a one-week high on Monday as fears over a trade war between the United States and China subsided. This news trumped the rise in the U.S. Dollar to a five-month high versus a basket of currencies, which tends to weigh on demand for dollar-denominated assets.
July Comex High Grade Copper futures settled at $3.0985, up $0.0350 or +1.13%.
Traders said the market is convinced demand will outweigh supply growth. Some of the demand is expected to come from China. China’s economy will likely expand by around 6.7 percent in the second quarter this year, the State Information Center said on Saturday.
Gold futures hit a new low for the year on Monday after U.S. Treasury Secretary Steven Mnuchin declared that a trade war between the United States and China was “on hold,” fueling a rally in the U.S. Dollar and increased appetite for risky assets.
June Comex Gold futures settled at $1290.90, down $0.40 or -0.03%.
The precious metal was also pressured by expectations that the U.S. Federal Reserve will lift U.S. interest rates again next month, further hurting demand for non-yielding assets like gold.
In other news, hedge funds and money managers cut their net long positions in Comex gold contracts by 21,294 contracts to 31,327 in the week to May 15, data showed on Friday.
Crude oil futures surged on Monday, hitting a 3.5 year high on geopolitical concerns over Iran and Venezuela that could lead to supply disruptions. The market rallied despite early session weakness attributed to the news that a trade war between the United States and China was declared “on hold.”
Concerns over Iran were fueled as U.S. Secretary of State Mike Pompeo’s remarks on Iran strategy showed that the United States was after regime change in the Islamic Republic, a senior Iranian official told Reuters on Monday.
Venezuela’s socialist President Nicholas Maduro faced widespread international condemnation on Monday after his re-election in a weekend vote his critics denounced as a farce cementing autocracy in the crisis-stricken oil producer.
The United States is actively considering oil sanctions on OPEC member Venezuela, where output has dropped by a third in two years to its lowest in decades.