Energy Metals Reprice as Supply Risks Ease Gold RisesUp

Key Moments:

Oil Market: Weakness at the Front of the Curve

The oil market is heading toward a fourth straight weekly decline as crude shipments through the Strait of Hormuz continue to recover, pushing ICE Brent closer to $70/bbl.

As regional flows normalize, pressure has intensified on the prompt segment of the ICE Brent forward curve. The structure is increasingly sliding into contango, signaling a well-supplied near-term market. This renewed availability of barrels is occurring alongside ongoing releases from strategic petroleum reserves. With outright prices falling and the curve shifting into contango, conditions could start to attract fresh buying interest from participants looking to take advantage of weaker values.

Refined Product Inventories: ARA and Singapore Trends

Refined product stock data from Insight Global show a modest draw in the Amsterdam-Rotterdam-Antwerp (ARA) hub. Total product inventories in the region declined by 22kt on the week to 4.53mt.

Light-end products led the move lower, with gasoline inventories falling by 75kt and naphtha stocks down by 26kt. In contrast, middle distillates registered an increase, as jet fuel inventories rose by 66kt and gasoil stocks added 16kt.

In Singapore, refined product inventories fell by 1.73m barrels over the week to 40.45m barrels. Despite the weekly decline, stocks remained above the recent low of 34.41m barrels seen in early June, though they stayed below the 5-year average of 45.32m barrels. Draws were reported across the barrel: light, middle, and residual product inventories fell by 665k barrels, 420k barrels, and 648k barrels, respectively.

US Natural Gas: Storage Surprise Versus Heat-Driven Demand

In US natural gas markets, front-month Henry Hub futures softened after storage data revealed a larger-than-anticipated inventory build. US gas stocks increased by 87bcf last week, exceeding both market expectations of 84bcf and the 5-year average injection of 64bcf.

Despite the bearish storage surprise, an ongoing heatwave across parts of the US is expected to lend support to natural gas demand for power generation, as higher temperatures drive additional cooling needs.

Aluminium: Easing Geopolitical Premium

In base metals, LME aluminium came under renewed selling pressure, with the three-month contract retreating toward $3,000/t. The move reflects the continued unwinding of the geopolitical risk premium that had accumulated during the Middle East conflict.

Market sentiment deteriorated further after an update from Emirates Global Aluminium (EGA). The company reported that around 7% of production pots at its Al Taweelah smelter have been restarted, signaling steady progress in restoring capacity following missile and drone attacks earlier in the year.

This update bolstered expectations that supply interruptions in the Gulf are likely to be temporary. Earlier fears about lost production in the Middle East and potential disruptions to shipping through the Strait of Hormuz had driven aluminium prices sharply higher. As output gradually recovers and regional tensions ease, participants perceive a more comfortable supply outlook.

Although a meaningful portion of Al Taweelah’s capacity remains offline and a full ramp-up will take time, the latest progress supports the view that curtailed supply will steadily re-enter the market, helping to alleviate concerns over aluminium availability.

Gold: Macro Repricing and Central Bank Flows

In precious metals, gold rallied strongly after weaker-than-expected US employment data reduced worries that the Federal Reserve might need to increase interest rates this year. The softer payrolls figures pushed US Treasury yields and the US dollar lower, enhancing the relative appeal of non-yielding assets such as gold.

The advance extended gains from earlier in the week, following less hawkish-than-anticipated remarks from Fed Chair Kevin Warsh. Against this backdrop, investors are reassessing the trajectory of US monetary policy. Market attention is likely to remain centered on upcoming economic indicators to judge whether the recent cooling in labor market conditions persists. A sustained moderation would further ease pressure on the Fed to tighten policy and could continue to underpin gold prices.

Central Bank Gold Activity: May Buying Patterns

Meanwhile, central banks were net buyers of gold in May, adding around 41 tonnes, according to the World Gold Council. Poland was the largest buyer, purchasing 18 tonnes and lifting its year-to-date additions to 64 tonnes. China extended its buying streak to 20 consecutive months, increasing its reserves by 10 tonnes. Uzbekistan and Kazakhstan expanded their holdings by 9 tonnes and 7 tonnes, respectively.

On the selling side, Russia reduced its gold reserves by 6 tonnes in May, taking year-to-date disposals to 34 tonnes. Turkey also continued to trim its holdings, cutting reserves by 3 tonnes and bringing total sales this year to 81 tonnes. Persistent net central bank demand remains an important pillar of support for the gold market.