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Weekly Commodities ETF Report: Crude, Gold End Week Higher on Positive Developments in US-China Trade Talks

(MT Newswires) – Commodities were mostly firmer for the week, reflecting positive developments in the trade negotiations between the US and China. The trade dispute between the world’s two largest economies has weighed on commodities in the past several months, and most traders are optimistic that an agreement can be reached before March 1, although the deadline might be moved to give more time to hammer out details of an agreement. On Friday, President Donald Trump said a deal on currency has been reached after a meeting with China’s Vice Premier Liu He. The trade talks, which restarted early in January, will be extended for two more days. They have gained momentum in recent weeks but differences still remain over fundamental issues such as illicit technology transfers and improper subsidies for state-owned firms. Trump also said he expected to meet with China’s President Xi Jinping to finalize a trade deal.

Crude prices ended Friday’s session higher and the week in positive territory — the second week in a row as the progress in US-China trade outweighed supply concerns. The US became the first country in the world to pump out 12 million barrels of oil per day (bpd) last week, as reported by the Energy Information Administration (EIA). The increase in production undermines joint efforts of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers led by Russia to stabilize the market with cuts of 1.2 million bpd. The EIA data also show that US crude stockpiles surged by 3.7 million barrels over the week to Feb. 15 — that compares with expectations for a 3.1 million-barrel increase in a Reuters’ survey of analysts. The increase took the inventories to 454.5 million barrels, the highest level since October 2017. On the other hand, the American Petroleum Institute said US crude oil stocks rose by 1.3 million barrels to 448.5 million barrels in the week to Feb. 15. Energy services firm Baker Hughes (BHGE) reported Friday that the number of oil rigs operating in the US fell by four to 853, the lowest level since the period ending Feb. 1. The US gas rig count was unchanged at 194, bringing the country’s total for the period through Friday to 1,047. Meanwhile, a report from the Wall Street Journal said Venezuela’s oil inventories have also climbed to their highest levels in at least five years, citing satellite data, as US sanctions on the country’s biggest oil company Petroleos de Venezuela in January have hit exports.

Light, sweet crude oil for April delivery rose 1.74% for the week, settling at $57.26 per barrel at the end of Friday’s session. In other energy futures, gasoline rose 1.29% during the week, settling at $1.77 per gallon on Friday. Natural gas rose 2.56% this week at $2.74 per 1 million British thermal unit.

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) was 1.21% higher this week, compared with an increase of 1.16% in the previous week.

Gold wrapped up the Friday session higher, settling at $1,332.80. Earlier in the week and before the release of the Federal Reserve’s January meeting minutes, gold had touched 10-month highs, but declined sharply on Thursday as the dollar gained strength after the Fed minutes hinted at a possible hike in interest rates sometime this year due to a fairly strong labor market and the overall strength in the economy. According to the minutes, many participants observed that if recent uncertainty eases, the Fed would need to reassess the characterization of monetary policy as “patient” and might then use different statement language.  However, the yellow metal returned to positive territory to end the week up 0.43%, bolstered by upbeat sentiment on the US-China trade talks. Also benefitting from this optimism, copper closed Friday’s session at $2.95 per pound, rising 4.50% higher for the week. Chile, the world’s largest exporter of copper, had an upbeat forecast for the red metal should the trade dispute between the US and China end. The Chilean government said it sees an average price of $3.05/lb for the year, up from $2.96/lb in 2018.

In agriculture commodities, grains ended the week mostly higher: corn edged 0.52% higher in the week and settled at $3.85 per bushel in Friday’s session; wheat dropped 3.11% lower and settled at $4.92 per bushel at the end of Friday’s session; and soybeans rose 0.19% for the week, but closed Friday in negative territory at $9.24 per bushel. The USDA released its initial commodity outlooks for the year at the 2019 Agricultural Outlook Forum in Arlington, Va. The US corn outlook for 2019/20 is for increased production, up 3% from 2018; exports are up 25 million bushels, reflecting expectations of modest growth in global trade and a slight decline in US market share with competition from other exporters. For wheat, the 2019/20 outlook is for reduced supplies, minimally lower use and decreased ending stocks. Production is expected to be 1.902 million bushels, 1% higher than 2018/19. Competition from Australia and the European Union is expected to increase. And for soybeans, the 2019/20 outlook is for record supplies, higher crush and exports and lower ending stocks. Production is expected to be 4.2 billion bushels, 8% below 2018.  US exports for soybeans are expected to recover despite continued import duties in China.

Other commodities were mixed: sugar had a weekly increase of 2.08% and settled at a price of $0.13 per pound on Friday; coffee was around $1.00 per pound at Friday’s close, down 1.62% for the week; and cocoa fell 2.18% lower for the week and closed Friday’s session at $2,288 per tonne.

The SummerHaven Dynamic Agriculture Index Total Return Index (SDAITR) was down 0.21% for the week, compared with an increase of 0.50% in the prior week.


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