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Weekly Commodities ETF Report: Copper, Soybeans Among Hardest Hit by US-China Trade Conflict

(MT Newswires) – – Crude ended in negative territory for the week, as a planned increase in the Organization for Petroleum Exporting Countries’ (OPEC) output was followed by a surprise increase in US inventories and higher oil rig count. Last week, OPEC ministers had announced that they approved an increase in oil supplies, but US President Donald Trump has called on Saudi Arabia, one of the most influential countries in the group, to increase the production cap further and to help lower oil prices. The president had released a series of tweets this week urging OPEC to “reduce pricing now!” Meanwhile, the number of oil rigs operating in the US rose by five to 863, according to data from energy services firm Baker Hughes (BHGE), which tracked the seven-day period ending July 6. The combined oil and gas rig count in the US also climbed by five to 1,052, as gas rigs were flat at 187. On Thursday, data from the Energy Information Administration showed that US crude inventories climbed by 1.2 million barrels over a week to June 29 as imports grew and refineries cut output. The jump compared with expectations for a 3.5 million-barrel drop in a Reuters’ survey of analysts.

Over the last week, light, sweet crude oil for August delivery was down 0.58% and closed at $73.80 per barrel. In other energy futures, gasoline declined during the week, down 1.93% and settled at $2.11 per gallon at the close of Friday’s session. Meanwhile, natural gas fell 2.19% lower this week and was down in Friday’s session at $2.86 per 1 million British thermal unit.

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) fell 1.59% this week, from an increase of 0.51% in the previous week.

Gold ended the Friday session lower, settling at $1,255.80 to finish the week up 0.15%, as traders weighed on the latest economic data releases as well as focusing on the Federal Reserve’s minutes, released earlier this week. The minutes revealed that “[n]egative risks to economy from US trade policy have intensified” but that the central bank still believed the economy is doing well. It still expects that its plan to increase interest rates two more times this year will continue. Meanwhile, reactions to the relatively upbeat employment report from the Labor Department on Friday were muted. The report said nonfarm payroll employment jumped by 213,000 jobs in June after surging up by an upwardly revised 244,000 jobs in May. However, the unemployment rate rose to 4.0% in June from 3.8% in May, as temporary school jobs ended for the summer. Copper, on the other hand, continued to plunge this week, dropping 4.94% and settling at $2.82 at the close of Friday’s regular session. The red metal has been one of the worst hit by the trade conflict between the US and China — but other factors in the last few months have also contributed to its declining prices — including the strengthening of the US dollar, weakening demand from China, and a global surplus in refined copper. According to the International Copper Study Group (ICSG), the surplus was 55,000 tonnes in March 2018, compared with 87,000 tonnes in February. The group also reported that the surplus for the first three months of the year was 1,53,000 tonnes of refined copper, compared with 84,000 tonnes in the same period a year earlier.

Agriculture commodities ended the week sharply lower — again, weighed by the escalating trade war between the world’s two largest economies: sugar had a weekly decline of 5.96% and settled at a price of $0.12 on Friday; coffee was at $1.14 per pound at Friday’s close, with a weekly drop of 1.13%; and cocoa fell 1.31% for the week and closed Friday’s session at $2,465. Among grains, corn was up 0.27% in the week and settled at $3.73 per bushel in Friday’s session; and, wheat rose 2.34% for the week and settled at $5.15 per bushel at the end of Friday’s session. Meanwhile, soybeans rose 1.68% for the week, closing at $8.95 per bushel on Friday even as China canceled its orders for US soybeans earlier this week. About 1.14 million tons of soybeans were due to be shipped by the end of August. China, which is the largest soybean buyer in the world, has contracted to increase its purchases of soybeans from Brazil and has state reserves of domestic and imported soybeans — although the volume of these reserves has not been disclosed. Some analysts believe that there might be a shortage in soybean supplies by the fourth quarter of this year or first quarter of next if the country will continue to cancel shipments of soybeans from the US.

The SummerHaven Dynamic Agriculture Index Total Return Index (SDAITR) rose 0.10% for the week, compared with a surge of 20.07% in the prior week.


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