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Weekly Commodities ETF Report: Crude Logs Gains as Traders Digest Supply Response to Lower Demand Due to Coronavirus Outbreak; Lingering Concerns Drive Gold to 7-Yr High

(MT Newswires) – Crude oil was lower on Friday but managed to end the week in positive territory, as traders mulled the supply response to weaker demand caused by the coronavirus.  Jet fuel demand fell as airlines cut the number of flights to and within China, where many factories and businesses remain shuttered. However, Commerzbank analyst Carsten Fritsch, in a research note, said the slowing down of Chinese demand was ” considerable” and that “… according to industry sources, refineries in China are currently processing (about) 10 million barrels of crude oil per day. This is 25% less than the average figure last year, and the lowest volume since 2014.”

The risk to crude demand in Q1 is piling pressure on the Organization for the Petroleum Exporting Countries (OPEC) and non-OPEC producers led by Russia — a cartel known as OPEC+ — to “remove the abundant oil” from the market, according to a separate research report by Commerzbank analysts Daniel Briesemann and Carsten Fritsch. OPEC+ is cutting 1.7 million barrels of crude daily, a stance that is coming up for review next month in a joint meeting.

Crude oil inventories increased by about 400,000 barrels during the seven days ended Feb. 14, reaching around 442.9 million barrels, the Energy Information Administration (EIA) reported.  This trailed the expected 3.3 million-barrel rise expected by industry experts polled by S&P Global Platts. The American Petroleum Institute late Wednesday reportedly said crude stockpiles grew by 4.2 million barrels last week. Finally, the count for oil in the US rose by one rig to 679 in the week through Friday, according to data compiled by energy services firm Baker Hughes (BKR). A year ago, the US had 853 oil rigs in operation.

Light, sweet crude oil for April delivery rose 2.12% for the week, settling at $53.88 per barrel at the end of Friday’s session. In other energy futures, gasoline was up 10.74% over the last five days and settled at $1.67 per gallon on Friday. Natural gas ended the week up 3.19%, settling at $1.92 per 1 million British thermal unit at the end of Friday’s session.

The SummerHaven Dynamic Commodity Total Return Index (SDCITR) rose 1.43% for the week, compared with an increase of 1.11% in the prior week.

Copper inched higher on Friday, with a settlement price of $2.59; it also closed the week higher, up 0.06%. Outlook for the red metal brightened as China implemented several measures to mitigate the impact of the coronavirus outbreak. The People’s Bank of China cut the one-year loan prime rate (LPR) and the above five-year LPR, the benchmark lending rate, to help support local businesses. The latest rate cut followed the reduction in the one-year medium-term lending facility. Amid the outbreak, the virus-hit Hebei Province created a 50 billion yuan ($7.1 billion) special fund aimed at supporting businesses to get back on track and to ensure funding for infrastructure projects will not be delayed.

Gold surged to a seven-year high on Friday, closing the session at $1,620.50 and finishing the week up 3.75% as investors shunned riskier assets and took advantage of the yellow metal’s safe-haven status. Worries over the spread of the coronavirus persisted despite the decline in reported Covid-19 cases in China and the measures the country has undertaken to limit the outbreak’s impact. The concern now is that the number of those infected by the coronavirus outside of China is rising, with Japan reporting two deaths, while South Korea confirmed its first fatality from the disease. The virus has also spread to Iran, where there are 18 confirmed cases and four deaths in just two days.

In agricultural commodities,  Bloomberg News reported earlier in the week that Chinese buyers purchased at least two cargoes of sorghum from US exporters, signaling China’s return to the US farm goods market after the country disclosed a list of US exports that will be exempted from additional tariffs. Buyers also made an inquiry about soybeans but did not make firm bids because Brazil’s soybeans remain competitively priced, the report added, citing people familiar with the matter.  China will issue tariff waivers on 696 American products starting March 2. The list includes soybeans, pork, beef, corn, wheat, crude oil and liquefied natural gas.

Among grains, soybeans fell 0.56% and closed the Friday session at $8.91 per bushel; corn settled at a price of $3.77 per bushel on Friday, down 0.33% on the week; and wheat ended the week down 1.52%, closing the Friday session at a price of $5.52 per bushel. Other commodities were mixed:  sugar had a weekly increase of 3.92% and settled at a price of $0.15 per pound on Friday; coffee was around $1.10 per pound at Friday’s close, down 0.45% for the week; and cocoa was down 1.60% for the week and closed Friday’s session at $2,843 per tonne.


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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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USO002144 Ex. 4/30/2020