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Weekly Commodities ETF Report: Crude Ends Week Higher as Middle East Tensions Spark Anew; Gold Surges Higher on Hopes of Interest Rate Cut

(MT Newswires) – Crude ended Friday’s session higher and closed the week in positive territory; within the past five days, it also touched the highest level in six weeks. Prices had risen amid renewed geopolitical tensions in the Strait of Hormuz, following a report that the Royal Navy in the UK prevented an alleged attempt by Iran to seize a tanker near the Strait of Hormuz, off the southern coast of Iran. The risk of attack on tankers in the region is now deemed “critical.” To compound matters, Iran is threatening to further increase uranium production, after having breached a level that it had agreed to stay within under the now-defunct Iran Nuclear Accord. Oil prices also got a lift this week after producers and shippers trained their focus on the weather — given that the US hurricane season is getting underway — as a tropical storm threatened oil installations in the Gulf of Mexico. US inventory data was also supportive of oil prices this week. US inventories of crude oil plunged by 9.5 million barrels over a week to July 5, data published by the Energy Information Administration showed. This was steeper than the 3.1 million-barrel slump forecast in a Reuters’ survey of analysts and the 8.1 million-barrel drop projected by the American Petroleum Institute. Meanwhile, the International Energy Agency said in a report Friday that first-half oil supply exceeded demand by 0.9 million barrels per day. Its latest data showed a global surplus in Q2 of 0.5 million barrels per day, versus previous expectations of a deficit of the same level. Finally, energy services firm Baker Hughes (BHGE) said active US rigs drilling for oil fell by four this week to 784. A year ago, the count was 863. This week’s tally was the lowest since the 765 rigs reported in the week ended Feb. 2, 2018.

Light, sweet crude oil for August delivery rose 4.37% for the week, settling at $60.20 per barrel at the end of Friday’s session. In other energy futures, gasoline was up 2.07% during the week and settled at $1.99 per gallon on Friday. Natural gas logged an increase of 2.42% this week, ending Friday at $2.42 per 1 million British thermal unit.

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) rose 1.48% this week, compared with a decline of 0.77% the prior week.

Gold finished Friday’s session higher at $1,406.70, ending the week up 1.07% and continued to be driven by monetary policy news. Federal Reserve Chair Jerome Powell’s testimony in front of Congress and the Senate during the week reaffirmed expectations for a rate cut at the end of the month. Powell gave the market no reason to expect anything less than a 25-basis-point rate cut at the July 30 – 31 meeting. He said the Federal Open Market Committee is concerned about trade tensions and slowing global growth, and that some “weak inflation will be even more persistent.” Meanwhile, industrial metals remained under pressure amid a lack of any supportive fundamentals, and copper prices logged losses throughout the week as the global growth outlook kept investors’ interest lackluster. In addition, the latest trade data out of China showed that the country’s exports declined 1.3% in June while imports showed a larger drop of 7.3%. Expectations had been for exports to fall 1.4% and imports to decline 4.6%, according to Bloomberg’s estimates. Analysts now expect that, following the downbeat trade data, demand for commodities will continue to be weak. However, the red metal managed to end the week 1.13% higher at $2.69 per pound.

The impact of the US-China trade war came to the fore this week after US President Donald Trump said in a tweet that China is letting the US down as the East Asian country is not fulfilling its promise of increasing its imports of agricultural products. According to a report on Bloomberg, Trump said that Chinese President Xi Jinping agreed to buy big volumes of US farm products after the two leaders reached a deal to restart the trade talks. Trump also agreed to the suspension of tariffs on an additional $300 billion of Chinese exports, the report noted. However, data released Thursday showed otherwise as US exports to China of soybeans decreased from the previous week to 127,000 metric tons, while pork orders went down to 79 tons from 10,400 tons in June. A spokesman for the Chinese Ministry of Commerce Gao Feng on Thursday did not confirm if China indeed agreed to buy US farm products as part of the two leaders’ agreement in the G20 summit in Osaka. An article on state-run Xinhua News Agency only mentioned that Trump hoped for China to boost its orders of US goods. In his tweet, Trump said he hopes China would begin buying US agriculture products.

Among grains, corn for December delivery rose 4.07% in the week and settled at $4.59 per bushel in Friday’s session; wheat rose 1.26% and settled at $5.23 per bushel at the end of Friday’s session; and soybeans were up 4.25% for the week, and closed Friday in the red at $9.32 per bushel. Other commodities were mixed: coffee was around $1.07 per pound at Friday’s close, down 3.57% for the week; cocoa was up 1.38% for the week and closed Friday’s session at $2,503 per tonne; and sugar had a weekly decline of 0.32% and settled at a price of $1.23 per pound on Friday.

 

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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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The SummerHaven Dynamic Commodity Index Total ReturnSM (SDCITR) is an index designed to reflect the performance of a portfolio of 14 commodity futures. The index is reformulated each month from 27 possible futures contracts. The 14 selected contracts are equally weighted and represent six sectors: Energy (WTI crude oil, Brent crude oil, natural gas, heating oil, gasoil, RBOB gasoline), Precious Metals (gold, silver, platinum), Industrial Metals (aluminum, copper, lead, nickel, tin, zinc), Grains (corn, soybeans, soybean meal, soybean oil, wheat), Livestock (live cattle, feeder cattle, lean hogs) and Softs (coffee, cocoa, cotton and sugar). One Cannot invest directly in an index.

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USO002009 Ex. 9/30/2019