Crude ended Friday’s session higher, regaining ground after seeing its biggest one-day decline in more than four years, but ultimately ended the week in the red amid worsening trade relations between the world’s two largest economies. Earlier this week, crude prices were on the uptick; according to Action Economics, expectations for a Federal Reserve rate cut on Wednesday have supported prices, with hopes that extra stimulus will bump up economic activity, and therefore oil demand. However, the positive sentiment following the Federal Reserve’s 25 basis-point rate cut collapsed after US President Donald Trump said Thursday that he is putting 10% tariffs on an additional $300 million of Chinese imports. The move has further dampened the outlook for global growth and sent markets in Europe and Asia lower.
Meanwhile, US inventories of the hydrocarbon commodity fell by more than expected last week. Stockpiles of crude oil contracted by 8.5 million barrels to 436.5 million barrels in the week ended July 26, according to data published by the Energy Information Administration. This was a larger decline than the American Petroleum Institute’s projection, released on Tuesday, for a weekly drop of 6 million barrels but it was lower than the 10.8 million barrel decline seen the prior week. Finally, the number of oil rigs operating in the US fell by six to 770 during the week that ended Aug. 2, the lowest level since Feb. 2, 2018, according to data compiled by energy services firm Baker Hughes (BHGE).
Light, sweet crude oil for September delivery fell 1.55% for the week, settling at $53.95 per barrel at the end of Friday’s session. In other energy futures, gasoline was down 2.92% during the week and settled at $1.75 per gallon on Friday. Natural gas decreased 0.70% this week, ending Friday at $2.20 per 1 million British thermal unit.
The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) fell 2.64% this week, compared with a decline of 0.51% in the prior week.
Gold finished Friday’s session higher at $1,432.40, hitting fresh six-year highs as the U.S. dollar weakened and investors looked for a safe haven from weaker stock markets and economic turmoil as the United States expanded its trade war on China. The gains come a day after sharp losses for the yellow metal, which had been weighed earlier in the week by the Fed’s widely expected interest rate cut. The yellow metal closed the week in positive territory, up 2.43%. Meanwhile, copper prices ended the week down 4.59% and closed Friday lower — hovering near its lowest price for the year so far at $2.67 per pound, as renewed trade tensions weighed on industrial metals. Supply issues also resurfaced, following a Reuters report that said Chile’s state-run Codelco will further delay the reactivation of its smelter until the end of October this year. Sources told Reuters that the world’s top copper producer has missed the previous reactivation target of April.
Agriculture commodities were once again in focus as the renewed US-Sino trade war centered on China’s purchase of US agricultural products. On Thursday, a day after the two countries’ trade talks ended in Shanghai, China’s Ministry of Commerce said some Chinese companies have already applied to lift additional tariffs on U.S. produce. The ministry noted that the Customs Tariff Commission of the State Council is handling the applications. MOC spokesperson Gao Feng also said that state-owned and private companies have commenced deals to buy products like soybeans, cotton, pork and sorghum. However, by late Thursday Trump announced the additional tariffs on $300 billion worth of Chinese goods, claiming that China had pledged to increase purchases of US agricultural products, but did not. He also alleged Beijing reneged on a promise to stop the sale of Fentanyl to the US.
Among other grains, soybeans were down 3.25% for the week, but closed Friday in the green at $8.69 per bushel; corn for September delivery fell 3.48% in the week and settled at $4.10 per bushel in Friday’s session; and wheat dropped 1.01% and settled at $4.91 per bushel at the end of Friday’s session. Other commodities were mostly lower: coffee was around $0.98 per pound at Friday’s close, down 1.35% for the week; cocoa was down 3.14% for the week and closed Friday’s session at $2,320 per tonne; and sugar had a weekly increase of 0.17% and settled at a price of $0.12 per pound on Friday.
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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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USO002028 Ex. 9/30/2019