Stronger Dollar Presses Metals as Middle East Oil Supply Recovers

Brent crude edged lower to around $91/bbl as recovering Middle East supply eased immediate concerns about availability.

By James Calloway

What changed in the crude market?

ING Commodities Strategist Ewa Manthey and Warren Patterson, the firm's head of commodities strategy, said Middle East supply was “recovering,” with OPEC production up nearly 2 million barrels per day. They also wrote that regional flows were “nearing pre-war levels.”

Those developments brought more barrels back into a market that had been focused on immediate availability. ING tied the lower oil price to that supply recovery, giving traders a physical-market explanation for the morning move.

For crude traders and refiners, the immediate question is how quickly the nearly 2 million b/d increase reaches regional buyers and whether flows continue closing the gap to pre-war levels. With no country breakdown, forward production path or meeting date in the note, traders must judge durability from regional flow data rather than a detailed forecast.

The crude takeaway is simple: additional Middle East supply is taking urgency out of the physical market.

How is the dollar affecting industrial metals?

The firmer US dollar was the common pressure point across the metals complex, although each metal had its own additional drivers. Copper traded near a four-month low as the currency strengthened and renewed selling in technology stocks weighed on the metals complex.

For iron ore, ING identified downward pressure from the stronger dollar, weaker Chinese steel demand and uncertainty over US import tariffs. The distinction matters for industrial-metal traders: copper was linked directly to the dollar and technology-stock selling, while iron ore also carried China demand and US trade-policy risks.

ING did not offer a near-term copper recovery case. The market signal was a four-month low, a firmer dollar and a renewed technology-stock selloff, leaving traders to judge whether those forces begin to reverse.

For industrial-metal traders, the dollar is the shared pressure point, while demand and trade-policy risks make iron ore the more exposed industrial metal.

Why is gold's short-term setup under pressure?

Gold extended its decline for a third session and slipped below $4,000/oz. ING linked the move to stronger US inflation data and hawkish comments from Federal Reserve officials, which pushed Treasury yields higher.

ING's near-term view was that gold could remain pressured by the stronger dollar and higher rates. Its longer-term view was more supportive: Manthey and Patterson described gold's prospects as “constructive,” citing central-bank buying and safe-haven demand.

The two time frames therefore do not line up. Near-term prices face pressure from the currency and yields, while the longer-term case rests on buying from central banks and demand for protection during periods of stress.

Gold's takeaway: rates and the dollar drive the immediate signal, while central-bank buying and safe-haven demand underpin the longer case.

ING presents the assessment for information only. It says the analysis is not an investment recommendation, legal or tax advice, or an offer or solicitation to buy or sell a financial instrument.

What should traders watch next?

For oil, the most useful follow-up will be evidence on whether Middle East flows keep recovering and whether OPEC's nearly 2 million b/d production gain holds. A further move toward pre-war flows would reinforce ING's supply-recovery explanation; a reversal would weaken it.

For metals, watch the dollar and Treasury yields for copper and gold, Chinese steel demand for iron ore, and any greater clarity on US import tariffs. Copper's four-month low and gold's third-session decline put those macro signals into immediate focus.

For industrial-market participants, the dollar is the shared pressure point, while demand and trade-policy risks make iron ore the more exposed industrial metal.

The watch point is the next round of regional supply, dollar, yield and steel-demand data; those readings will show whether current pressure is easing or broadening.