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[MARKET UPDATE] Near-term risk premia removed to the detriment of crude and XAU, though risks remain

The removal of near-term risk premia is pressuring crude oil and gold prices today, as geopolitical uncertainties fade with the TACO trade and market commentary from China.

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[MARKET UPDATE] Near-term risk premia removed to the detriment of crude and XAU, though risks remain

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  • Crude is on the backfoot, as the TACO trade takes the sting out of a near-term escalation on Greenland. However, we still wait to see details on how the deal will be done and exactly what the US will walk away with and demand; initial reporting suggests it will be similar to the UK-Cyprus arrangement. Further pressure also stemming from the Private inventory report, which posted a larger-than-expected headline crude build
  • WTI and Brent down to USD 60/bbl and USD 64.57/bbl, lower by c. USD 0.60/bbl. 
  • European gas is on the back foot, lower by around a EUR/MWh for Dutch TTF. However, this comes after the benchmark extended to a EUR 41.92/MWh peak early doors, a move driven by US NatGas settling higher by some 25% on Wednesday, alongside continued focus on the European & APAC cold spell. While the benchmark has pulledback from the above peak and is ultimately lower on the session, it remains at the upper-end of this week's EUR 38-41.92/MWh parameters and over EUR 10/MWh above last week's EUR 28.81/MWh opening level.
  • Spot gold has been tarnished by the removal of near-term risk premia by Trump's tariff U-turn. However, the numerous geopolitical meetings and opportunities for commentary today mean a return of premia is a real possibility. As it stands, XAU is holding at USD 4822/oz, having recovered from the USD 4772/oz overnight low but pushed lower once again in recent trade after the PBoC commentary that they will be increasing their supervision of the gold market. 
  • Elsewhere, Goldman Sachs has increased its end-2026 PT for Gold to USD 5.4k/oz from USD 4.9k/oz.
Context

Crude's decline is compounded by a larger-than-expected inventory build, which suggests increased supply pressures, while gold remains volatile amidst mixed signals on potential geopolitical tensions. Traders should watch for how those underlying dynamics evolve, especially with ongoing geopolitical discussions that could reinstate some risk premium.

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