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Oil and gold prices dropped on Monday in tandem with a broader sell-off in the global equity markets, driven by growing concerns of a recession in the United States.
Brent crude oil futures plummeted to under $76 per barrel, hitting an eight-month low, while WTI crude oil futures dropped below $72.5 per barrel, the lowest in six months, despite geopolitical tensions in the Middle East, as traders assess poor demand in the world’s largest oil consumer.
A weaker-than-expected U.S. jobs report on Friday weighed heavily on risk assets. “The release suggests that the U.S. economy is slowing more rapidly than expected, raising recession fears. This only adds to Chinese demand concerns that have been lingering in the oil market for some time,” ING analysts said in a note.
“However, while there are growing demand concerns, geopolitical risks continue to hang over the oil market. Participants are waiting to see how Iran responds to the assassination of the political leader of Hamas on Iranian soil,” ING Head of Commodities strategy Warren Patterson and Commodities Strategist Ewa Manthey said.
On the corporate side, oil and gas companies scheduled to report earnings this week include, Devon Energy (DVN), Diamondback Energy (FANG), Marathon Oil (MRO), Marathon Petroleum (MPC), Occidental Petroleum (OXY) and ONEOK (OKE).
Hedge funds have, meanwhile, turned predominantly bearish on commodities futures for the first time since 2016, showing increased pessimism on demand for raw materials amid economic slowdown fears, Bloomberg reported.
Money managers held a net position of almost 58,600 contracts used to bet on lower prices for a basket of 20 raw materials in the week ended July 30, according to U.S. Commodity Futures Trade Commission data compiled by Bloomberg. For more than eight years — including the peak of the pandemic — investors had held a net bullish wager on prices, the report said.
Turning to metals, safe-haven gold (XAUUSD:CUR) ticked lower 0.7% after initial gains, and following a weekly rise on Friday. Gold is often considered a safe bet in times of geopolitical turmoil, economic uncertainty, or financial market instability. The non-yielding metal has risen 18% this year, and is expected to find support from long-awaited rate cuts in the U.S. and renewed appeal from Western investors for the rest of the year.
Base metals too traded in the red amid demand uncertainty and weakness in equity markets. Copper prices have experienced a significant retreat from their record highs in May due to rising inventories in China.
Elsewhere, among agriculture commodities, cocoa and wheat futures tracked losses in the broader market, while soybeans held steady.
Recent Commodity Price Movements and A look At Some ETFs
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Energy
Metals
Agriculture
Commodity ETFs
Gold ETFs:
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