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Weekly Commodities ETF Report: Crude Ends Week Down Most Since May on Weakening Demand, Middle East Tensions; Gold Boosted by Renewed Hopes for Interest Rate Cut

(MT Newswires) – Crude ended Friday’s session lower, with prices recording their biggest weekly decline since the end of May amid falling demand for oil and mounting geopolitical risks in the Middle East. According to the BBC, the owners of Stena Impero, which was bound for Saudi Arabia, said they are unable to contact the vessel, which is now understood to be heading toward Iran. CNBC reported that a spokesperson for the UK Ministry of Defense said that the government was urgently seeking further information and assessing the situation following reports of an incident in the Gulf. This comes a day after the US Navy “destroyed” an Iranian drone in the Strait of Hormuz after it came within 1,000 yards of the US ship. Iran however, denied having lost a drone on Thursday. On the same day, several media sources reported that the International Energy Agency’s (IEA) executive director Fatih Birol said the agency was revising down the global oil demand forecast to 1.1 million barrels per day, from 1.2 million barrels per day. Birol warned that the agency may be forced to further cut its outlook for demand if the global economy, especially China, shows further signs of weakness, according to Reuters.

Meanwhile, US crude stockpiles decreased for the fifth consecutive week, with the draw coming in sharper than expected. Commercial crude oil inventories fell 3.1 million barrels in the week through July 12 to 455.9 million and are about 4% above the five-year average for this time of year, data published by the Energy Information Administration showed. That compares with a decline of 9.5 million barrels a week earlier and is more than the 1.4 million-barrel decline reportedly expected by the American Petroleum Institute. Finally, the number of oil rigs operating in the US fell by five to 779 during the week that ended July 19, according to data compiled by energy services firm Baker Hughes (BHGE). The combined oil and gas rig count in the US was down by four to 954 as gas rigs were up by two to 174, while miscellaneous were down by one.

Light, sweet crude oil for August delivery fell 7.09% for the week, settling at $55.30 per barrel at the end of Friday’s session. In other energy futures, gasoline was down 6.28% during the week and settled at $1.83 per gallon on Friday. Natural gas logged a decrease of 8.30% on the week, ending Friday at $2.29 per 1 million British thermal unit.

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) fell 2.36% during the week, compared with an increase of 1.48% in the prior week.

Gold finished Friday’s session lower at $1,428.10 but ultimately closed the week in positive territory, up 0.62%. The yellow metal benefitted from the recent dovish comments from New York Fed President John Williams, which sparked hopes for an interest-rate cut by the end of July.  Williams said in a speech Thursday that central banks should “act quickly” to cut rates when inflation and interest rates are low, but an economy is faltering. A New York Fed spokesperson later said Williams’ remarks were academic, not practical in nature. Meanwhile, copper prices ended the week up 1.91% and closed Friday higher at $2.71 per pound, following a report from the World Bureau of Metal Statistics that said the copper market had a surplus of 21,000 tonnes in the January to May period.  Meanwhile, June customs data from China showed that imports of commodities such as copper declined month over month, hinting at a further softening of demand. China reported that imports of unwrought copper fell 9.7% in June from May, and ores and concentrates sank 20.4%. Copper is widely used in manufacturing, especially in China’s export sector.

In agriculture commodities, China’s statistics bureau in a Monday release said planting area for soybeans increased in the first half, with expectations for the area to widen 8% in 2019 to 8.67 million hectares from last year. The country has been encouraging farmers to plant more soybeans, with the Ministry of Agriculture setting a goal of expanding soybean planting area to 140 million mu (mu a common measurement used in China: 1 MU is equal to 6.0703 acres) by 2020. With the government’s calls for this increase in soybean production, as well as the trade war between the US and China, market watchers expect that soybean imports will decline further this year. Data from China’s customs authority showed that the country’s soybean imports during the first half of 2019 have already fallen 14.7% year over year to 38.27 million tons.

Among grains, corn for September delivery fell 5.05% in the week and settled at $4.36 per bushel in Friday’s session; wheat rose 3.77% and settled at $5.03 per bushel at the end of Friday’s session; and soybeans were down 1.32% for the week, and closed Friday in the red at $9.19 per bushel. Other commodities were mixed: coffee was around $1.07 per pound at Friday’s close, up 0.52% for the week; cocoa was down 1.00% for the week and closed Friday’s session at $2,467 per tonne; and sugar had a weekly decline of 5.85% and settled at a price of $1.16 per pound on Friday.

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

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Commodity trading is highly speculative and involves a high degree of risk. Commodities and futures generally are volatile and are not suitable for all investors. Investing in commodity interests subject each Fund to the risks of its related industry. An investor may lose all or substantially all of an investment. These risks could result in large fluctuations in the price of a particular Fund’s respective shares. Funds that focus on a single sector generally experience greater volatility. Leveraged and inverse exchange-traded products pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. For further discussion of these and additional risks associated with an investment in the Funds please read the respective Fund Prospectus before investing.

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.

Performance is historical and does not guarantee future results; current performance may be lower or higher. Investment returns/principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Most recent performance is available at www.uscfinvestments.com.

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USO002009 Ex. 9/30/2019

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