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Weekly Commodities ETF Report: Sanctions on Venezuela, Tighter Production Boost Crude Prices; Gold, Soybeans Gain on Strong Economic Data, Progress in Trade Talks

(MT Newswires) – Crude prices ended Friday’s session higher as tighter US sanctions on Venezuela’s access to the global financial system and reduced exports by Saudi Arabia to the US combined for unexpected tightness in supplies for US refiners.  The Organization of the Petroleum Exporting Countries (OPEC) and its allies also appear to be making headway in plans to trim nearly 1.2 million barrels per day from the market in the first six months of the year. Reuters reported that crude oil production from OPEC dropped by a massive 890,000 bpd in January from the previous month. That marked the largest month-on-month drop since January 2017. Meanwhile, the US oil rig count, an indicator of crude output, fell by 15 in the week to 847, posting the steepest decline in three weeks, according to data from energy services firm Baker Hughes (BHGE). The North American total was down by three in the week to 1,288 — unchanged from a year ago.  Earlier in the week, the Energy Information Administration said that US stockpiles of commercial crude rose by 919,000 barrels to 445.9 million, much less than an expected increase of more than 3 million barrels but still 7% above the five-year average for this time of year. On the other hand, the American Petroleum Institute said US crude oil inventories rose 1.1 million barrels to 445.7 million last week, less than the expected increase of 3.2 million barrels in the weekly estimates.

Light, sweet crude oil for March delivery rose 3.27% for the week, settling at $55.26 per barrel at the end of Friday’s session. In other energy futures, gasoline jumped during the week, up 2.09% and settling at $1.44 per gallon on Friday. Natural gas for March delivery slumped 10.26% during the week, closing at $2.73 per 1 million British thermal unit.

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) was 0.02% higher this week, compared with a decline of 0.06% in the previous week.

Gold wrapped up the Friday session slipping lower but ended the week up 1.05%, closing at $1,322.10. At one point during the week the yellow metal hit eight-month highs following the Federal Reserve’s decision to leave interest rates unchanged on Wednesday. The Fed also removed a sentence describing the risks to the economic outlook as “roughly balanced” with Fed Chair Jerome Powell saying “the case for raising rates has weakened somewhat.” With bond yields turning lower and the dollar staying somewhat subdued, the demand for the safe-haven yellow metal increased yet again. Strong US economic data also pushed gold to weekly gains, as fairly upbeat US jobs data and acceleration in manufacturing activity eased concerns about US economic growth. According to the data released by the Labor Department, nonfarm payroll employment surged by 304,000 jobs in January compared with economist estimates for an increase of about 165,000 jobs. A separate report from the Institute for Supply Management showed growth in the manufacturing sector unexpectedly reaccelerated in January after seeing a substantial slowdown in December. The ISM said its purchasing managers index climbed to 56.6 in January from a revised 54.3 in December, with a reading above 50 indicating growth in the manufacturing sector. Copper ended the week up 1.41% and settled at $2.77 per pound, but weak data out of China’s manufacturing sector has kept those gains in check. China’s manufacturing activity fell at the sharpest pace in nearly three years in January, due to declines in both new work and production, survey data from IHS Markit showed on Friday. The Caixin/Markit Manufacturing Purchasing Managers Index (PMI) for January fell a second straight month, reaching 48.3 – its worst reading since February 2016 – from 49.7 in December and well below the 49.5 level expected.

Agriculture commodities ended the week mixed: among grains, wheat edged 0.67% higher and settled at $5.24 per bushel at the end of Friday’s session; corn slipped 0.53% in the week and settled at $3.78 per bushel in Friday’s session; and soybeans fell 0.65% for the week, but closed Friday in positive territory at $9.17 per bushel. Friday’s gains were sparked by optimism that the US and China might reach a trade deal before the March 1 deadline. The two-day US-China trade talks ended without concrete results, but China had promised to “substantially” expand purchases of US soybeans. US President Donald Trump said he hopes to accommodate China and reach a deal by the March 1 deadline. He also said he would meet Xi Jinping soon to try to seal a comprehensive trade deal. Meanwhile, other commodities such as sugar had a weekly increase of 1.61% and settled at a price of $0.13 per pound on Friday; coffee was around $1.04 per pound at Friday’s close, down 2.90% for the week; and cocoa fell 2.29% for the week and closed Friday’s session at $2,168 per tonne.

The SummerHaven Dynamic Agriculture Index Total Return Index (SDAITR) was down 0.52% for the week, compared with a decrease of 0.19% in the prior week.

 

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Information Contact: Justin Hillstrom – 720.917.0770 Email: Justin.hillstrom@alpsinc.com, Website is www.uscfinvestments.com

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