Copper dips as soaring oil prices weigh on economic outlook

LONDON: Copper gave up early gains to trade lower on Thursday, tracking equity markets downwards after oil prices hit their highest in more than seven weeks on escalating hostilities in the Middle East.

Benchmark three-month copper on the London Metal Exchange was down 0.6% at $13,725.50 a metric ton at 0930 GMT, having climbed as much as 0.5% earlier in the session on concerns over dwindling inventories.

Oil prices rose for a fifth day, jumping as much as 5% to $98.75 a barrel after Yemen’s Houthis said they attacked two oil tankers as part of a blockade on Saudi Arabia.

Higher energy prices are weighing on the outlook for the global economy, for which copper is considered a bellwether, and increasing the likelihood of increases to interest rates.

Thin inventories were supporting copper prices, however, with available LME stocks of 107,850 tons the lowest since January. The cash LME copper contract was trading at a $4.70 premium over the three-month forward on Wednesday, indicating tight near-term supply.

“It’s pretty clear for us that there’s no appetite to invest in the downside on copper,” Pierre-Alix Favillier, head of base metal options at Sucden Financial, said on a webinar.

“If you look at the investment appetite and the AI story behind, it’s only going higher.”

In top metals consumer China, the Yangshan copper premium — a gauge of demand for imports — was assessed at $115 a ton on Wednesday, the highest daily assessment since November 2022.

Prices have also been supported by strong copper shipments into the United States ahead of a potential tariff on refined copper imports. Traders are awaiting details of the proposed tariff.

Elsewhere, aluminium fell 0.3% to $3,183 a ton, zinc rose 0.6% to $3,614, nickel gained 1% to $17,405, notching a one-month high, while tin added 0.6% to $54,020 and lead edged up by 0.2% to $1,899.50.