Easing geopolitical tensions weighed on energy markets, with oil and gas ending lower. Metals gained as recent losses were considered overdone. Gold steadied amid robust haven demand.
By Daniel Hynes
Market Commentary
Crude oil prices plunged amid signs of weaker demand and easing supply concerns. Geopolitical risks appeared to ease after it was reported that Ukraine’s President Zelensky had arrived in Turkey to reinvigorate negotiations regarding its war with Russia, despite rising tension between the two nations. An Axios report that the US has been consulting with the Kremlin to draft a new plan eased supply concerns. These developments helped cushion the impact of US sanctions against two of Russia’s largest oil companies, Rosneft and Lukoil. The US Treasury claimed the restrictions are already undermining Russia’s funding capacity. Signs of weaker demand in the US also weighed on sentiment. The Energy Information Administration’s weekly inventory report showed gasoline and distillate stockpiles in the US built for the first time in over a month. The rise in gasoline inventories was driven by a drop in weekly consumption, with the implied demand down 500kb/d to 8.53mb/d last week. Total crude oil inventories fell 3,426kbbl to 424,155kbbl.
Easing geopolitical risks weighed on the natural gas markets, with European gas futures falling 2.4%. While Russia covers just over 10% of the European Union’s gas needs, down from 40% before its invasion of Ukraine. The prospect of a major peace deal brokered by US between Russia and Ukraine still eased concerns of tightness in the market. The fall was exacerbated by the European Centre for Medium-Range Weather’s forecast for less dramatically cold conditions across Europe next week. North Asia LNG prices were steady, with inventories in the spotlight. Japanese utilities are holding their highest level in more than five months, raising concerns that they will reduce their spot purchases in coming weeks.
Gold steadied after earlier gains, as the USD rose ahead of key earnings and US economic data. Investors sought haven assets such as gold ahead of the release of the Federal Reserve’s latest meeting minutes. Recent weak jobs numbers have raised hopes of further rate cuts. That demand dried up as the USD strengthened late in the session.
Copper edged higher amid a slight improvement in risk appetite. Sentiment was bolstered by a report from Chile’s copper agency Cochilco, which is now expecting an improved price environment. It raised its price forecasts for this year and next, citing a weaker USD and global economic resilience. However, underpinning the backdrop is the continued underperformance of the Chilean copper industry. Cochilco replaced its previous projection of 1.5% production growth this year with one of no growth. Its estimate of 2.5% growth in 2026 is also based on El Teniente returning to normal, something the owner Codelco has said won’t happen. The squeeze in London’s zinc market is showing some signs of relief. Critically low stockpiles have begun to recover, as rising prices spur a surge in Chinese shipments. Stockpiles tracked by the London Metal Exchange have risen for a ninth day, with small volumes arriving in warehouse across Asia. This follows data showing that Chinese output is on track for an annual record. This has seen refined zinc exports rise sharply in October. They are expected to remain elevated amid attractive arbitrage conditions.
Chart of the Day
China is the world’s largest producer of refined zinc, making up over half of the world’s supply. Production has surged in 2025 and is on track for an annual record. However, smelter output outside China has contracted due to high energy costs and uneconomic treatment charges, leading to closures in Japan and curtailments in Europe. This is why global inventories have been on a steady decline (aside from the build over the past nine days).
Data source: Commodities Wrap