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Weekly Commodities ETF Report: Crude Hits Highest Level So Far in 2019 on OPEC-Led Production Cuts; Gold Rises on Progress in US-China Trade Talks

(MT Newswires) – Crude prices ended Friday’s session higher and the week in positive territory, briefly hitting 2019 highs above $65 per barrel earlier in the week, helped by supply cuts led by The Organization of the Petroleum Exporting Countries (OPEC) and the announcement of an even deeper cut by Saudi Arabia. OPEC cut nearly 800,000 barrels of output per day in January, just short of its goal of cutting 812,000 bpd, in a bid to tighten the oil market. Top exporter and de facto OPEC leader Saudi Arabia said earlier in the week that it plans to produce around 9.8 million barrels per day of oil in March, over half a million bpd below its pledged production level. Oil prices also remained supported by the partial closure of Saudi Arabia’s Safaniya offshore oil fields, which affected production capacity of more than 1 million barrels per day (bpd). Neither the cause of the outage or the expected duration were immediately known, according to reports. There is also concern of a demand slowdown ahead of normal spring refinery maintenance. Energy services firm Baker Hughes (BHGE) reported Friday that the number of oil rigs operating in the US rose by three to 857. The combined oil and gas rig count in the US climbed by two to 1,051 as gas rigs fell by one to 194. Earlier in the week, the Energy Information Administration said crude inventories rose by 3.6 million from the previous week to reach 450.8 million barrels. That’s about 6% above the five-year average for this time of the year. On the other hand, the American Petroleum Institute said the weekly crude inventories were down 998,000 barrels.

Light, sweet crude oil for March delivery rose 5.73% for the week, settling at $55.59 per barrel at the end of Friday’s session. In other energy futures, gasoline rose 7.26% during the week and settling at $1.74 per gallon on Friday. Natural gas for April delivery rose 1.03% for the week at $2.66 per 1 million British thermal unit.

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) was 1.16% higher for the week, compared with a decline of 0.34% in the previous week.

Gold wrapped up the Friday session higher, settling at $1,322.10 and ending the week up 0.49% as two days of US-Chinese trade talks concluded on a positive note. High-level talks between American and Chinese officials ended in Beijing and it remains unclear whether the two sides have made any progress in resolving the thorny issues. Gold prices also remain supported by uncertainties around Brexit and increasing political uncertainty in Europe after Spanish Prime Minister Pedro Sanchez called for a snap general election in April. The dollar fell on the back of weak US retail sales data released Wednesday, logging its worst showing since September 2009. The data fanned concerns of slowing economic momentum in the world’s largest economy and reinforced expectations that the Federal Reserve will not raise interest rates this year. Meanwhile, copper closed Friday’s session at $2.80 per pound, inching 0.20% higher for the week. The red metal also benefitted from optimism following progress in the US-China trade talks, but gains were tempered by reports that China’s factory-gate price growth fell below estimates. For the month of January, producer price inflation growth from the largest consumer of copper was at its weakest pace since early September. Nevertheless, the outlook on copper demand remains positive as China also reported that its copper import numbers were up sharply, with shipments of unwrought copper up 14% in January to 479,000 tonnes. Copper concentrate imports rose 17% year over year to 1.9 million tonnes.

In agriculture commodities, grains ended the week mostly lower, despite the developments in the US-China trade talks: corn edged 0.20% higher in the week and settled at $3.83 per bushel in Friday’s session; wheat dropped 2.74% lower and settled at $5.07 per bushel at the end of Friday’s session; and soybeans fell 0.94% for the week, but closed Friday in positive territory at $9.21 per bushel.  The US Department of Agriculture (USDA) reported that export sales showed net cancellations of US soybeans totaling 610,900 tonnes in the week ended Jan. 3. The agency is continuing to clear the backlog resulting from the recent US government shutdown. Other commodities were mixed: sugar had a weekly increase of 3.48% and settled at a price of $0.13 per pound on Friday; coffee was around $1.02 per pound at Friday’s close, down 4.26% for the week; and cocoa rose 4.65% higher for the week and closed Friday’s session at $2,339 per tonne. According to a Reuters survey of analysts and traders, cocoa prices are set to increase despite a slight global surplus. Forecasts were for cocoa to have a global surplus of 30,000 tonnes for the 2018/19 season — just above 2017/18 estimates of 22,000 tonnes, according to the International Cocoa Organization. Analysts and traders have cited these factors that could underpin cocoa prices: currency volatility due to Brexit and lower quality supplies of Cameroon cocoa, as well as uncertain weather and possible political turmoil in Ivory Coast, a top producer of cocoa.

The SummerHaven Dynamic Agriculture Index Total Return Index (SDAITR) was up 0.50% for the week, compared with a decrease of 1.09% in the prior week.


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