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Weekly Commodities ETF Report: Crude, Gold End Week in Positive Territory as Optimism for Upcoming US-China Trade Talks Grows

(MT Newswires) – Crude prices dropped in the fourth quarter of 2018 amid worries over growing production and waning global demand, but the key commodity finished Friday higher amid broader gains in US stock markets. Hopes of a trade truce between the US and China and output cuts put into place by members of the Organization of the Petroleum Exporting Countries (OPEC) infused much-needed confidence into the commodities market. Representatives from the world’s two largest economies are expected to hold trade talks in Beijing next week, according to news reports. This comes after tense relations between the two countries in recent months following the imposition of hefty levies on imported goods by both nations. Global oil output was lower meanwhile after ministers from OPEC and non-OPEC countries decided in early December to adjust overall production by 1.2 million barrels per day effective from January 2019 for an initial period of six months. The decision came in view of a growing imbalance between global oil supply and demand. Meanwhile, the latest data from the Energy Information Administration showed that US stockpiles of commercial crude came in at about 441.42 million barrels in the week ending Dec. 28, compared with 441.41 million barrels the week earlier. This compares with the American Petroleum Institute’s report that US crude oil stocks fell 4.5 million barrels last week to 443.7 million barrels, versus an expected dip of 3.1 million barrels. Finally, Baker Hughes (BHGE) said Friday that the number of oil rigs operating in the US dropped by eight to 877 in the seven-day period ending Jan. 4. The combined oil and gas rig count in the US also fell by eight to 1,075 as gas rigs were flat at 198.

Light, sweet crude oil for February delivery jumped 6.78% for the week, settling at $47.96 per barrel at the end of Friday’s session. In other energy futures, gasoline rose during the week, up 4.80% and settling at $1.35 per gallon on Friday. Natural gas, however, sank 8.49% this week at $2.91 per 1 million British thermal unit.

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) was 0.44% higher this week, compared with a decline of 0.20% in the previous week.

Gold closed the Friday session in the red, settling at $1,285.80, but logged modest gains to end the week 0.24% higher, as optimism returned to stocks ahead of the scheduled US and China trade talks. China’s commerce ministry said that China and the US would hold vice ministerial-level trade talks in Beijing on Jan 7-8 in a bid to defuse trade tensions. Additionally, a strong labor market report coupled with remarks from Federal Reserve Chair Jerome Powell eased Wall Street’s fears of the Fed hiking rates into a recession. Powell assured investors that the Fed listens to Wall Street and would adjust balance-sheet normalization if needed. Meanwhile, the US Labor Department reported 312,000 new jobs in December, versus forecasts for an increase of 182,000. The number also brings the total employment gains for the year 2018 to 2.64 million — a three-year high. The unemployment rate rose to 3.9% from the previous rate of 3.7% — due mainly to the number of people who joined the workforce in search of jobs. On the other hand, copper ended Friday’s session up at $2.65 per pound, with much of the gains sparked by upbeat data on China’s services sector. The Caixin China Composite Purchasing Managers’ Index data –  which covers both manufacturing and services –  showed a further rise in overall Chinese business activity during December. The rate of expansion picked up from November, with the Composite Output Index rising from 51.9 to a five-month high of 52.2. Readings above 50 signal expansion while those below indicate contraction. Services companies in China registered a solid rate of activity growth, while manufacturing output expanded slightly after two months of stagnation. For the week, however, the red metal fell 1.31%, as doubts over China’s weakening economy in 2019 persisted, with Citigroup citing mixed economic data and a slowdown in household consumption.

Agriculture commodities ended the week mixed, with grains among the gainers: wheat rose 0.93% and settled at $5.17 per bushel at the end of Friday’s session; corn was up 2.07% in the week and settled at $3.83 per bushel in Friday’s session; and soybeans rose 2.99% for the week, closing at $9.22 per bushel on Friday. Wheat was higher on expectations of strong demand for US supplies, while soybeans were up as adverse weather in Brazil and Argentina threatened to affect the supply of soybeans from those countries. Meanwhile, other commodities such as sugar had a weekly decline of 3.71% and settled at a price of $0.12 per pound on Friday; coffee was around $1.02 per pound at Friday’s close, up 0.54% for the week; and cocoa fell 2.33% for the week and closed Friday’s session at $2,361 per tonne.

The SummerHaven Dynamic Agriculture Index Total Return Index (SDAITR) was 0.25% higher for the week, compared with the 0.91% decrease in the prior week.


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