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Weekly Commodities ETF Report: Crude Surges to Month’s Highest Level on Optimism Coronavirus Impact Can be Abated; Gold Hits 2-Week High

(MT Newswires) – Crude oil rose to the highest level this month on optimism that the impact of the coronavirus may be short-lived.  The World Health Organization reportedly played down fears by saying the recent jump in the number of diagnoses didn’t necessarily reflect a sudden surge in new infections, soothing investors’ nerves after the change in China’s diagnosis methodology undermined confidence in a recent deceleration in the rate of coronavirus infections. Additionally, the People’s Bank of China  eased monetary policy after the outbreak, supporting the view that the global health emergency won’t be allowed to escalate.

The optimism is outweighing downbeat views such as those expressed by the International Energy Agency (IEA) this week. The IEA expects demand this year to grow by only 825,000 barrels per day (b/d) rather than 1.2 million b/d, “as was still expected just a month ago,” the analysts said. This would be the smallest rise since 2011.

Meanwhile, Commerzbank said it does not believe that the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers led by Russia, also known as OPEC-plus, will cut supplies even further next month, from 1.7 million barrels a day currently. The firm said OPEC was likely to find it hard to implement more output cuts because on Sunday it expected production to resume at the Wafra oilfield in a so-called neutral zone between Saudi Arabia and Kuwait, which has been suspended since 2015. Both the IEA and Kuwait see production from the Neutral Zone increasing in the near term, lifting supply at a time demand is relatively weak.

The Energy Information Administration (EIA) reported on Wednesday that inventories of US crude surged by 7.5 million barrels over a week to Feb. 7, three times more than the market had anticipated.  Finally, the count for oil in the US rose by two rigs to 678 in the week through Friday, according to data compiled by energy services firm Baker Hughes (BKR). That was the highest since Dec. 20. A year ago, the US had 857 oil rigs in operation.

Light, sweet crude oil for March delivery rose 3.32% for the week, settling at $51.42 per barrel at the end of Friday’s session. In other energy futures, gasoline was up 3.70% over the five-day period and settled at $1.58 per gallon on Friday. Natural gas ended the week down 0.32%, settling at $1.83 per 1 million British thermal units at the end of Friday’s session.

The SummerHaven Dynamic Commodity Total Return Index (SDCITR) rose 1.11% for the week, compared with an increase of 0.73% in the prior week.

Gold rose to the highest in two weeks on Friday, closing the session higher at $1,578.80 as stocks weakened, pushing investors to the safety of gold. The yellow metal ended the week up 0.78%. The gains come as investors moved funds out of equities, taking profits in advance of the weekend as the impact of the coronavirus continues to hobble China’s economy. Even though businesses have slowly started to re-open and most employees returned to work, the quarantines from the prior weeks have cut travel and impacted factories and businesses amid the rising cases and fatalities. According to Johns Hopkins University data, 64,547 infections have now been confirmed, with 1,384 fatalities.

On the other hand, copper ended Friday in the red with a settlement price of $2.61, but ultimately was up 2.12% for the week. Traders had cited lower demand in the spot market, weighed by the toll from the coronavirus outbreak in China, which is a major consumer of the red metal.

In agricultural commodities news, US national security adviser Robert O’Brien had said the coronavirus outbreak could adversely impact the phase one trade agreement between the US and China, particularly affecting China’s purchases of US farm goods. China had pledged to buy $40 billion of US farm products in the next two years under the trade deal, which was signed Jan. 15.  “We expect the phase one deal will allow China to import more food and open those markets to American farmers, but certainly as we watch this coronavirus outbreak unfold in China it could have an impact on how big, at least in this current year, the purchases are,” Reuters quoted O’Brien as saying.

Among grains, soybeans prices rose 1.13% for the week and closed the Friday session at $8.94 per bushel; corn fell 1.44% on the week, settling Friday at a price of $3.78 per bushel; and wheat ended the week down 2.64%, closing the Friday session at a price of $5.43 per bushel. Other commodities were mixed:  sugar had a weekly decrease of 2.68% and settled at a price of $0.15 per pound on Friday; coffee was around $1.11 per pound at Friday’s close, up 12.2% for the week; and cocoa was down 0.38% for the week and closed Friday’s session at $2,886 per tonne.

 

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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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USO002140 Ex. 4/30/2020