How Are Crude Oil Prices Trending in 2025?
The Three-Week Rally in Crude Oil Markets
Crude oil has demonstrated remarkable resilience, posting gains for three consecutive weeks in mid-2025. US oil futures have increased by 1.45% this week, while Brent oil futures have shown even stronger performance with a 2.09% weekly gain. This consistent uptrend suggests underlying strength in global energy markets despite economic uncertainties.
The sustained momentum comes amid a complex interplay of supply constraints and geopolitical tensions that have created a supportive environment for oil price movements. Market analysts note that this three-week rally represents the longest sustained period of price increases since early 2025.
Impact of US Drilling Activity on Oil Supply
The US energy sector is showing signs of contraction, with Baker Hughes reporting that oil and natural gas rigs operated by US energy companies have declined for eight consecutive weeks—the first such extended decline since September 2023. As of June 20, 2025, the total rig count has fallen to 554, representing the lowest level since November 2021 and a 5.8% decrease year-over-year.
This US rig count decline could potentially constrain future supply and support prices. Industry experts point to several factors driving the decline:
- Capital discipline among US producers prioritizing shareholder returns over production growth
- Rising operating costs affecting profitability of marginal wells
- Labor shortages in key production regions
- Regulatory uncertainty impacting long-term investment decisions
The continued decline in active rigs serves as a leading indicator for potential production constraints in the coming months, as fewer new wells are being drilled to offset natural production declines in existing wells.
Geopolitical Factors Affecting Crude Oil Markets
Current geopolitical tensions, particularly between Iran and Israel, have introduced significant uncertainty into oil markets. While prices haven't surged dramatically, industry analysts are closely monitoring the situation for potential supply disruptions.
UBS analyst Giovanni Staunovo notes: "So far, oil exports have not been disrupted, and there is no shortage of supply. From now on, the direction of oil prices will depend on whether supply is disrupted."
Panmure Liberum analyst Ashley Kelty provides a more specific risk assessment, suggesting that escalation leading to attacks on export infrastructure or disruptions in the Strait of Hormuz could potentially push oil prices toward $100 per barrel.
Meanwhile, Russian President Putin has indicated that OPEC intervention isn't necessary at current price levels, stating that oil prices have not risen significantly due to the conflict between Iran and Israel.
Recent US sanctions on Iran have added another layer of complexity to the geopolitical landscape, though their immediate impact on oil flows appears limited. Market participants remain vigilant for any signs that the conflict could disrupt the approximately 20% of global oil flows that pass through the strategic Strait of Hormuz.
What's Happening in Base Metals Markets?
LME Base Metals Performance Analysis
The London Metal Exchange (LME) has seen broad-based strength across its metal contracts, with all base metals posting gains in recent trading. LME aluminum emerged as the standout performer with a 1.59% increase, while LME tin recorded the largest percentage gain at 2.13%.
Other metals showed more modest but still positive movements:
- LME copper rose 0.47%
- LME lead increased 0.15%
- LME zinc gained 0.32%
- LME nickel edged up 0.03%
This comprehensive strength across the base metals complex suggests improving industrial demand expectations and increasing confidence in manufacturing sector growth. The particularly strong performance of aluminum points to robust demand from construction, packaging, and transportation sectors.
Shanghai Futures Exchange Metals Trends
The domestic Chinese metals market, as represented by the Shanghai Futures Exchange (SHFE), has largely mirrored the strength seen in international markets. SHFE tin led gains with a 1.17% increase, followed by SHFE copper at 0.26%.
Most other contracts showed positive momentum:
- SHFE aluminum: +0.22%
- SHFE zinc: +0.14%
- SHFE lead: +0.12%
- Alumina futures: +0.14%
- Casting aluminum futures: +0.15%
The only exception was SHFE nickel, which declined by 0.22%. This underperformance in nickel reflects specific challenges in that market segment, with SMM analysis indicating that adjustment pressures are intensifying in the high-grade nickel pig iron (NPI) market.
The generally positive performance across SHFE metals aligns with improving sentiment regarding China's industrial activity and infrastructure development plans.
Ferrous Metals Market Performance
Ferrous metals have displayed mixed performance, indicating varied supply-demand dynamics across the steel production chain. Iron ore showed strength with a 0.57% increase, suggesting robust demand for steelmaking inputs.
The latest iron ore price forecast points to continued resilience in this key steelmaking input. Finished steel products also demonstrated positive momentum:
- Rebar: +0.1%
- Hot-rolled coil (HRC): +0.16%
- Stainless steel: Unchanged at 12,535 yuan per metric ton
However, in the coal sector, both coking coal and coke experienced declines of 0.06% and 0.65% respectively, potentially reflecting oversupply or reduced demand from steelmakers.
The divergent performance within the ferrous complex highlights the importance of monitoring individual supply chains rather than making broad generalizations about the sector. While steel products and iron ore are showing resilience, the weakness in coking coal and coke suggests potential margin pressure for steelmakers.
How Are Precious Metals Performing in Current Markets?
Weekly Performance of Gold and Silver
Precious metals have experienced a challenging period, with all major contracts recording weekly declines. COMEX gold futures fell 0.7% overnight, contributing to a substantial weekly decline of 1.98%. Similarly, SHFE gold rose 0.24% in the latest session but still posted a weekly loss of 1.81%.
The silver market faced even steeper overnight losses, with COMEX silver dropping 2.57%, though its weekly decline was more modest at 0.18%. SHFE silver fell 0.02% overnight, accumulating a weekly loss of 1.75%.
These consistent weekly losses across all major precious metals contracts indicate significant headwinds for the sector, contrasting sharply with the generally positive performance seen in base metals markets.
Factors Influencing Precious Metals Prices
The weakness in precious metals markets comes amid a strengthening US dollar, which rose 0.67% on a weekly basis to close at 98.78. The dollar's strength typically creates headwinds for dollar-denominated commodities like gold and silver by making them more expensive for holders of other currencies.
Additionally, shifting expectations regarding Federal Reserve monetary policy have influenced investor sentiment toward precious metals. Recent statements from Fed officials suggesting potential interest rate cuts have failed to provide significant support to gold and silver prices, indicating that other market factors are currently exerting greater influence.
Market participants are recalibrating their interest rate expectations based on recent economic data and Federal Reserve communications. While lower interest rates typically support non-yielding assets like gold, the current pricing suggests investors remain cautious about the timing and magnitude of potential rate cuts.
Investment Implications for Precious Metals
The divergence between precious metals and industrial metals performance highlights the different market forces affecting these commodity classes. While industrial metals benefit from improved manufacturing outlook and green energy transitions, precious metals are more sensitive to monetary policy expectations and safe-haven demand.
Some analysts are monitoring conditions for a potential silver market squeeze as investment demand patterns shift. The current weakness in gold and silver, despite ongoing geopolitical tensions, suggests that investors are currently more focused on interest rate trajectories and dollar strength than on traditional safe-haven assets. This creates potential strategic considerations for commodity investors:
- Portfolio diversification: The divergent performance across commodity sectors reinforces the diversification benefits of maintaining exposure to multiple commodity classes
- Tactical positioning: Current weakness may present entry opportunities for investors with a longer-term bullish outlook on precious metals
- Risk management: Investors should monitor both macroeconomic indicators and geopolitical developments to assess potential catalysts for precious metals
For tactical investors, the key question becomes whether the current weakness represents a temporary pullback or the beginning of a more sustained downtrend in precious metals.
What Macroeconomic Factors Are Influencing Commodity Markets?
US Federal Reserve Policy Expectations
Market participants are closely monitoring Federal Reserve communications for signals about future interest rate moves. According to the CME FedWatch Tool, the probability of the Fed maintaining interest rates unchanged in July has decreased to 83.5% (from 91.7% previously), with a 16.5% probability of a 25-basis-point interest rate cut.
For September, expectations show:
- 29% probability of unchanged rates
- 60.2% probability of a cumulative 25-basis-point cut
- 10.8% probability of a cumulative 50-basis-point cut
These shifting expectations have significant implications for commodity markets, particularly for interest-rate-sensitive assets like gold.
Recent Fed communications have provided mixed signals. Fed Governor Thomas Barkin stated that "current data does not show an urgent need for an interest rate cut, as the job market and consumption remain strong." Meanwhile, San Francisco Fed President Mary Daly suggested that "unless signs of weakness emerge in the labour market, an interest rate cut in the autumn seems appropriate."
The Fed's monetary policy report indicated that financial stability remains "resilient" amid increased uncertainty, providing an important backdrop for market expectations.
China's Green Energy Transition
China continues to make significant strides in its renewable energy transition, with wind power installed capacity growing rapidly. As of April 2025, the cumulative grid-connected installed capacity of wind power in China accounted for 15.5% of total capacity.
In the first four months of 2025, China's wind power generation reached 381.43 billion kWh, representing 12.78% of total power generation. This data, presented at the 2025 Offshore Wind Power Conference in Dalian, underscores China's commitment to renewable energy expansion.
Additionally, China's Ministry of Industry and Information Technology (MIIT) recently emphasized accelerating green momentum in emerging industries, focusing specifically on:
- Clean hydrogen production and utilization
- New energy storage technologies
- Green computing infrastructure
Recent China lithium innovations are also supporting this ongoing expansion of renewable energy infrastructure, which has important implications for metals markets, particularly for copper, aluminum, and rare earth elements used in wind turbines and power transmission.
Automotive Industry Developments
The China Passenger Car Association (CPCA) reports that June narrow-sense passenger vehicle retail sales are expected to reach 2 million units, representing a 13.4% year-over-year increase and a 3.2% month-over-month gain.
Notably, new energy vehicle sales are projected to reach 1.1 million units, pushing the penetration rate to approximately 55%. This continued growth in electric vehicle adoption has significant implications for battery metals markets, including lithium, cobalt, nickel, and copper.
The accelerating electrification of China's automotive fleet represents one of the most significant demand drivers for several key industrial metals. With new energy vehicles now accounting for more than half of new passenger vehicle sales in China, the structural shift in materials demand continues to reshape global metals markets.
What Are the Key Market Indicators to Watch?
US Dollar Index Movements
The US Dollar Index has shown strength, closing higher for the week at 98.78 with a 0.67% gain. The index remained relatively flat on Friday after Federal Reserve Governor Waller suggested that an interest rate cut could be considered as early as July given recent inflation data.
The Fed's monetary policy report indicated that financial stability remains "resilient" amid increased uncertainty, though market conditions remain sensitive to trade policy news. The dollar's trajectory will continue to be a critical factor for crude oil and metals market trends, as a stronger dollar typically creates headwinds for dollar-denominated commodities.
Currency markets are particularly sensitive to divergences in monetary policy between major central banks. As market participants reassess the likely path of Federal Reserve policy, the dollar's performance against major trading partners will have significant implications for commodity prices and global trade flows.
Upcoming Economic Data Releases
Market participants should monitor several key economic indicators in the coming week that could impact commodity market sentiment:
- Manufacturing and Services PMIs: Preliminary S&P Global PMI data for June covering France, Germany, the Eurozone, the UK, and the US will provide insights into business activity and industrial demand
- UK CBI Industrial Trends Orders: This survey will shed light on manufacturing conditions in the United Kingdom
- US Existing Home Sales: Housing market data offers perspective on economic conditions and materials demand
These indicators will help shape expectations regarding industrial demand for metals and energy commodities. Of particular importance will be any signs of manufacturing sector strength or weakness, as industrial activity remains a key driver for base metals demand.
Central Bank Communications
Several central bank officials are scheduled to speak in the coming week, including 2027 FOMC voter and San Francisco Fed President Daly, ECB President Lagarde, and Fed Governor Bowman.
Their comments on monetary policy and economic conditions could significantly influence market expectations regarding interest rates and, consequently, commodity prices. Market participants will scrutinize these communications for any indications of potential policy shifts or updated economic assessments.
Central bank communications have taken on heightened importance in the current environment, where markets are attempting to gauge the timing and magnitude of potential interest rate adjustments. Any unexpected shifts in tone or emphasis could trigger significant market reactions across asset classes.
How Are Specific Metal Markets Evolving?
Copper Market Dynamics
The copper market has shown resilience, with both LME and SHFE contracts posting gains of 0.47% and 0.26% respectively. Recent analysis of copper foil customs data indicates increases in both imports and exports on a month-over-month basis in May 2025, suggesting active trade flows.
The metal continues to benefit from its critical role in electrification and renewable energy infrastructure. Copper's essential role in electrical applications makes it particularly sensitive to developments in China's energy transition and global electrification trends.
Market participants should monitor several factors that could influence copper prices in the near term:
- The pace of renewable energy installations, particularly wind and solar
- Electric vehicle production trends
- Infrastructure development initiatives
- Potential impacts from proposed tariff measures on copper imports
The copper market's fundamentals remain supported by these structural demand drivers, though short-term price movements may be influenced by macroeconomic factors and currency fluctuations.
Nickel Market Challenges
The nickel market is facing headwinds, with SHFE nickel being the only base metal to decline in the domestic Chinese market, falling 0.22% while other metals gained. Analysis indicates that nickel prices continue to weaken, with adjustment pressures intensifying in the high-grade nickel pig iron (NPI) market.
These challenges may reflect supply-demand imbalances and warrant close monitoring by market participants. Several factors are contributing to nickel's underperformance:
- Expanded production capacity in Indonesia
- Changing battery chemistry trends in the EV sector
- Uncertain demand outlook from traditional stainless steel applications
- Inventory dynamics across various nickel product categories
The divergence between nickel and other base metals highlights the importance of understanding market-specific factors rather than treating industrial metals as a homogeneous asset class.
Lead Market Developments
The lead market has shown modest gains in both international and domestic markets, with LME lead rising 0.15% and SHFE lead increasing 0.12%. Recent analysis of refined lead imports and exports highlights significant market changes behind the data.
Understanding these trade flow dynamics is essential for anticipating future price movements in the lead market. The lead market continues to be influenced by developments in the automotive battery sector, with the balance between traditional lead-acid batteries and lithium-ion batteries for new energy vehicles creating complex market dynamics.
The modest gains in lead prices suggest stable market conditions, though the relatively small price movements indicate that lead lacks the strong bullish catalysts currently supporting some other base metals.
What Are the Investment Implications for Commodity Markets?
Diversification Benefits of Commodities
The varied performance across different commodity sectors—with crude oil and base metals generally rising while precious metals decline—highlights the diversification benefits of maintaining exposure to multiple commodity classes. This performance divergence can help investors manage portfolio risk and potentially capture returns across different market environments.
For portfolio managers, the current commodity market environment offers several potential benefits:
- Reduced correlation: The divergent performance between industrial and precious metals demonstrates how different commodity sectors can respond differently to the same macroeconomic factors
- Inflation sensitivity: Commodities historically provide a hedge against unexpected inflation, though with varying effectiveness across commodity types
- Economic cycle exposure: Different commodities respond differently to economic growth phases, allowing for tactical positioning
These diversification benefits are particularly relevant in the current environment of elevated economic uncertainty and shifting monetary policy expectations.
Sector-Specific Opportunities
Investors may find opportunities in specific commodity sectors based on current trends. The sustained strength in crude oil prices suggests potential opportunities in energy markets, while the broad-based gains in base metals indicate improving industrial demand.
Specific opportunities include:
- Energy transition metals: Copper and aluminum benefit from renewable energy expansion and elect
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