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Weekly Commodities ETF Report: Crude Closes the Week in Positive Territory Following Unexpected Drop in US Inventories; Gold Also Higher Ahead of Fed’s Interest Rate Decision This Week

(MT Newswires) – Crude ended Friday’s session and the week higher, continuing to log gains from the previous week following a surprise drop in US crude inventories. The Energy Information Administration on Thursday said oil inventories unexpectedly dropped by 1.7 million barrels for the week, easing demand worries. This was the first drop in five weeks, while most analysts had expected stocks to rise. The American Petroleum Institute had previously reported a build of 4.45 million barrels in US crude oil inventories for the week ending Oct. 18. Also providing support for crude prices was news of a shutdown of the Forties pipeline system in the North Sea, as well as reports that the Organization of the Petroleum Exporting Countries (OPEC) will consider further production cuts on top of the 1.2 million barrels per day already removed from the market when it and Russia meet in December. Meanwhile, the number of oil rigs operating in the US fell to a nearly 30-month low after posting back-to-back weekly gains. The crude equipment tally fell by 17 to 696 in the week through Friday to the lowest level since 688 were operating in the week ended April 21, 2017, data from Houston-based energy services firm Baker Hughes (BHGE) showed. A year ago, there were 875 oil rigs operating. Concerns over lower demand lingered, however, as weak European manufacturing data released earlier in the week showed demand growth is likely to remain weak as US trade wars continue to cut into global growth, with the International Monetary Fund saying earlier that the global economy is growing at the slowest pace since the financial crisis.

Light, sweet crude oil for November delivery rose 5.40% for the week, settling at $56.23 per barrel at the end of Friday’s session. In other energy futures, gasoline was up 0.73% over the last five days and settled at $1.63 per gallon on Friday. Natural gas was up 4.62% this week, ending Friday at $2.32 per 1 million British thermal unit.  

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) rose 1.71% for the week, compared with a decline of 0.92% the prior week.

Gold ended higher on Friday at $1,504.70 and the week up 0.92% despite a stronger US dollar ahead of this week’s decision on interest rates from the Federal Reserve. The gains came as uncertainty over Brexit and weak economic data from the US and Europe pushed investment to gold’s safe haven. However, the possibility of a third cut to US interest rates this year is also driving prices higher. The Fed’s Open Markets Committee meets next week to consider another rate cut as the country’s trade wars cut into global growth. Lower interest rates support the metal because it cuts the cost of owning gold since the metal offers no yield. Meanwhile, copper prices rose, ending Friday’s session at $2.67 and the week, up 1.48% on a possible supply shortage for the red metal, following news of production disruptions in Chile’s copper operations amid political protests in the country. However, gains were offset by continued concerns over the slowdown in the global economy’s growth as well as weak demand for the industrial metal. Additionally, an international organization of copper producing and using countries said that it expects a surplus of the red metal in 2020. The International Copper Study Group said that the copper market is projected to log a surplus of 281,000 tonnes next year, compared with the 320,000 tonnes in deficit in 2019.

In agricultural commodities news, China has pledged to buy at least $20 billion of agricultural products annually as part of the partial trade deal it will sign with the US, according to a report on Bloomberg Thursday. According to sources, the East Asian Country is also considering more purchases — as much as $40 billion to $50 billion — in the future rounds of the trade negotiations. Wheat ended the week down 2.69%, closing the Friday session at a price of $5.18 per bushel; soybeans were down 1.18% for the week, and closed Friday at $9.20 per bushel; and corn for December delivery fell 0.70% in the week and settled at $3.87 per bushel in Friday’s session. Other commodities were mostly higher: sugar had a weekly increase of 0.16% and settled at a price of $0.12 per pound on Friday; cocoa was down 1.65% for the week and closed Friday’s session at $2,435 per tonne;  and coffee was around $0.99 per pound at Friday’s close, up 3.71% for the week.

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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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USO002079 Ex. 12/31/2019