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Weekly Commodities ETF Report: Optimism for US-China Trade Deal Fuels Gains for Crude, Drives Gold Lower

(MT Newswires) – Crude ended Friday’s session and week higher, on media reports of a partial trade deal between the US and China, which augured well for oil demand globally. “Good things are happening” in the trade meeting with China, President Donald Trump had tweeted early on Friday. Bloomberg later reported the partial agreement could lay the groundwork for a broader deal Trump and China President Xi Jinping could sign later this year, according to people familiar with the matter.

Separately, a top official from the Organization of the Petroleum Exporting Countries (OPEC) signaled the producers’ cartel was prepared to leave no stone unturned to balance the energy market.  CNBC quoted OPEC Secretary-General Mohammad Barkindo as saying Thursday all options are on the table, including a deeper supply cut in production, to balance oil markets. He expected a decision on production strategy at a December meeting among members of the largely Middle Eastern cartel and non-OPEC producers, led by Russia. These developments helped the oil market outweigh the negative impact of a closely watched OPEC report released on Thursday that cut the outlook for growth in oil demand for the rest of 2019 to 980,000 barrels a day, a reduction of 40,000 barrels per day from an estimate set out in September.

Stockpiles of commercial crude in the US advanced for the fourth consecutive week but at a slower pace than in the previous week. The Energy Information Administration said the inventories rose by 2.9 million barrels in the week through Oct. 4 to reach 425.6 million barrels, in line with the five-year average for this time of year. A week earlier, the stockpiles were up by 3.1 million barrels, the government data showed. The American Petroleum Institute on Tuesday said crude supplies climbed by 4.1 million barrels over the same span.  And, the number of oil rigs operating in the US rose by two to 712 in the week that ended on Oct. 11, still hovering at its lowest level since May 2017, according to data compiled by energy services firm Baker Hughes (BHGE). The combined oil and gas rig count in the US rose by one to 856 as gas rigs fell by one to 143.

Light, sweet crude oil for November delivery rose 3.11% for the week, settling at $53.55 per barrel at the end of Friday’s session. In other energy futures, gasoline was up 4.15% over the five-day period and settled at $1.62 per gallon on Friday. Natural gas was down 5.36% for the week, ending Friday at $2.22 per 1 million British thermal unit.  

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) gained 2.03% this week, compared with a decline of 1.01% the prior week.

Meanwhile, the optimism for a potential end to the 15-month trade war between the world’s two largest economies drove gold lower, ending Friday in negative territory at $1,500.90. For the week, the yellow metal fell 1.25%.  On the other hand, copper rose higher following the upbeat trade news, closing Friday’s session at a settlement price of $2.61, and ending the week up 2.24%.  In other commodities news, S&P Global Ratings had lowered its guidance for copper prices for the year 2020, citing diminishing global trade flows as well as expectations for a slowdown in global economic growth.

In agricultural commodities, Chinese buyers have ramped up their orders for soybeans among other agricultural products from the US, as part of the ongoing trade negotiations. The US Department of Agriculture reported Thursday that 400,000 metric tons of new soybean purchases have been made, bringing the total to nearly 5 million metric tons bought by the Chinese so far this marketing year. Soybeans were up 1.99% for the week and closed Friday at $9.36 per bushel. Among other grains, wheat ended the week up 3.82%, closing the Friday session at a price of $5.08 per bushel; and corn for December delivery rose 3.44% in the week and settled at $3.98 per bushel in Friday’s session. Other commodities were weaker: coffee was around $0.94 per pound at Friday’s close, down 5.28% for the week; cocoa was down1.53% for the week and closed Friday’s session at $2,506 per tonne; and sugar had a weekly decline of 2.82% 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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USO002060 Ex. 12/31/2019