Crude Oil Prices Slightly Decline, Strong Dollar Impacts Commodities

Crude oil prices experienced a slight decline amid thin trading before the holiday, primarily influenced by a strong dollar and the resumption of supply through Russia's key Druzhba oil pipeline. As the U.S. government avoided a shutdown crisis, the strengthening dollar led to a drop in gold prices, and copper prices on the London Metal Exchange (LME) also fell.

WTI crude oil futures dropped by 0.3%, settling close to $69 per barrel, while Brent crude oil futures settled below $73 per barrel. After the close, the price declines for both benchmark oils narrowed and stabilized.

Countries like Belarus and Hungary resumed receiving crude oil via the Druzhba pipeline, which had been briefly interrupted last week due to an unspecified event. In the Americas, President-elect Donald Trump questioned the tolls on the Panama Canal, but the Panamanian president rebutted this.

The rise of the dollar weakened the appeal of commodities, and market attention shifted from news about the Panama Canal to factors affecting the supply-demand fundamentals for 2025. Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, noted that the market's reaction to news about the Panama Canal has been relatively muted.

However, hedge funds are showing some bullish signs. According to data from the U.S. Commodity Futures Trading Commission, as of the week ending December 17, hedge funds recorded the largest increase in net long positions in U.S. WTI crude oil in over a year. Previously, the market had anticipated that sanctions would reduce oil supplies from Russia and Iran, leading to rising oil prices.

WTI February crude oil futures fell 0.3%, settling at $69.24 per barrel; Brent February crude oil futures settled down 0.4%, at $72.63 per barrel.

Copper prices on the London Metal Exchange fell, with tin prices also declining. With the dollar's rise, LME copper dropped 0.3%, to $8,912 per ton; LME aluminum fell 0.3%, to $2,527 per ton; LME nickel dropped 0.4%, to $15,292 per ton; LME tin declined 0.5%, to $28,542 per ton; LME lead rose 0.3%, to $1,986 per ton; LME zinc increased 0.4%, to $2,984.5 per ton.

As traders assess the outlook for U.S. monetary policy in 2025, the rising dollar led to a drop in gold prices. Gold prices fell 0.6% at one point, while investors also considered the latest consumer confidence data and the performance of the core inflation indicator monitored by the Federal Reserve in November. Data from the Conference Board indicated that U.S. consumer confidence unexpectedly declined in December, marking the first drop in three months amid concerns over the economic outlook. The Federal Reserve's data released last Friday showed that the core inflation indicator eased in November, providing a positive signal for policymakers hoping for further rate cuts in 2025.

As a non-interest-bearing asset, gold typically performs better when interest rates decline. Gold prices have risen over 25% this year, reaching new highs, thanks to U.S. monetary easing policies, safe-haven demand, and purchases by central banks worldwide. However, following Donald Trump's election, the strong dollar has slowed gold's upward momentum, making dollar-denominated commodities pricier for most buyers.

As of 3:41 PM EST, spot gold fell 0.5%, trading at $2,610.84 per ounce; spot silver rose 0.5%, trading at $29.6815 per ounce.