Rising Oil Price to Put Further Pressure on Gold Costs
Most producers had already flagged higher AISC for 2026 though the gold price has risen significantly
The rapid rise in the oil price adds a further cost pressure for the mining sector.
The war in the Middle East has led to wild swings in gold and oil prices this month and the disruption of the world’s oil supply presents a major global threat.
Crude oil was trading in the US$60s per barrel a month ago and has rallied to well over US$100/bbl in the past week.
Oil flows through the Strait of Hormuz are currently sitting at less than 10% of pre-conflict levels.
An average of 20 million barrels per day of crude oil and oil products transited the Strait of Hormuz in 2025, or around 25% of the world’s seaborne oil trade. Options for oil flows to bypass the Strait of Hormuz are limited.
On Wednesday, the 32 member countries of the International Energy Agency unanimously agreed to make 400 million barrels of oil from their emergency reserves available to the market, the sixth coordinated stock release since the IEA’s formation in 1974.
“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA member countries have responded with an emergency collective action of unprecedented size,” IEA executive director Fatih Birol said.
“Oil markets are global so the response to major disruptions needs to be global too. Energy security is the founding mandate of the IEA, and I am pleased that IEA members are showing strong solidarity in taking decisive action together.”
IEA members hold emergency stockpiles of over 1.2 billion barrels, with a further 600 million barrels of industry stocks held under government obligation.
ANZ Research said the pace and duration of the release would be key.
“The dribbling of oil will do little to offset the millions of barrels that are being lost due to the effective closure of the Strait of Hormuz,” it said.
“The waterway carries approximately 20 million barrels per day. The maximum drawdown capability of the US Strategic Petroleum Reserve is 4.4 million barrels per day, and it takes 13 days for the oil to reach the open market after a presidential decision.”
After the announcement, crude was still trading above US$90/bbl.
Impact on gold miners
According to Van Eck, all-in sustaining costs across the gold sector averaged around US$1600 an ounce in 2025.
However, most major miners, including Newmont Corporation (NYSE: NEM), Barrick Mining Corporation (NYSE: B) and Agnico Eagle Mines (TSX: AEM), have forecast higher costs for 2026.
Newmont forecast a 23.7% rise in its gold by-product AISC to US$1680/oz, Barrick has forecast a 7.5-19.1% increase to US$1760-1950/oz, and Agnico guided to a 12% increase to US$1400-1500/oz.
Both Newmont and Barrick’s guidance assumes an oil price of US$70/bbl.
“We note that Newmont estimates a circa US$10/oz cost impact for a US$10/bbl move in oil prices, which is relatively modest given that gold prices are up more than US$1500/oz versus last year’s average gold price of US$3445/oz,” Canaccord Genuity analyst Carey MacRury said.
Agnico based its 2026 guidance on an assumed diesel benchmark of US78c per litre, excluding transportation and taxes.
“Including the diesel purchased for the company’s Nunavut operations that was delivered as part of the 2025 sealift, approximately 56% of the company’s total estimated diesel exposure for 2026 is hedged at an average benchmark price of US69c per litre (excluding transportation and taxes), which is expected to reduce the company’s exposure to diesel price volatility for 2026,” Agnico said in its full-year results release.
Energy, including grid power, account for around 10-20% of gold miners’ costs.
“We also note that many countries have regulated energy prices that can shield short term price moves and many companies have energy hedges in place,” MacRury said.
“In addition, energy intensity can vary dramatically across different operations with the self-generating diesel or HFO, open-pit operations would be the most impacted and grid-powered, underground operations, the least.”
VanEck gold and precious metals portfolio manager Imaru Casanova believes gold prices can rise further, supporting margins.
“We live in a world where a new gold catalyst seems to emerge every month,” she said in an article published this week.
“Market participants, many still watching from the sidelines, have observed gold’s relentless rally over the past couple of years and now appear convinced that these record prices are here to stay.”
AISC guidance provided by miners to date aligns with VanEck’s expectations of a 10-12% increase over 2025.
“The gold price closed at US$5278.93 per ounce on 27 February, up US$384.69 per ounce or 7.86% for the month, and US$959.60 per ounce or 22.22% year-to-date,” Casanova said.
“The math remains compelling: margins have already expanded year-over-year, and with estimated average industry AISC below US$2000 per ounce, the sector demonstrates substantial resilience at current price levels.
“These strong fundamentals support our view that gold mining equities are well positioned to outperform the metal again in 2026.”