Commodities Report 6.4 – 11.4.2020

The economy can’t be ignored in the discussion about the future

Futureoftheocean decided to invite students and young professionals of economy to provide insights and opinions, why not visions, on the economical topics of the present and of the future.


Mr. Fotis Kanatas and Spiros Kodoprias - Students at the Maritime Department of the University of Piraeus – are the first to open this new tab with weekly reports on the evolution of the main commodities.


Futureoftheocean encourages also people passionate about future, seas and oceans, maritime and economy to submit their posts for this new tab.

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Oil:

The previous week had as a highlight the OPEC+ virtual meeting on Thursday, in which the biggest oil suppliers were to cut production in order to spike up the tumbling prices. Despite the optimism that Saudi Arabia and Russia will eventually reach an agreement for around 10 million bpd, fears remain that the oversupply problem could be resolved with twice the discussed production cuts, according to Rystad Energy. Saudi Arabia and Russia made clear prior to the teleconference that any production cut will be done only if every country participates in the deal and especially the U.S. (the leading force as far as oil production is concerned – thanks to shale oil). Donald Trump indicated that production is already decreasing without any government intervention. After these developments, WTI (U.S. benchmark) marked a 9.4% decline while Brent (global benchmark) marked a 3.6% decline on Tuesday. On Thursday, reports claimed that the OPEC+ meeting was about to announce a 10 million bpd by June, which gave a spike in the oil prices. Additionally, putting more optimism in the final deal, Mexico decided to end its initial standoff and agree in a cut which will help the finalization of the deal. Both Brent and WTI closed the trading week (until Thursday due to Good Friday) in red, with Brent at 31.82 (-6.71%) and WTI at 23.21 (-18.10%).  

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Natural Gas:

 Natural gas keeps getting hit by all sides as low prices on oil in combination with the above average for the season temperatures, have cascaded prices. Natural Gas rallied midweek until $1,909 per MMBtu but met heavy resistance as prices struggled to surpass the $2 per MMBtu several times this year. On Thursday, the Energy Information Administration (EIA) announced on Thursday domestic supplies of Natural Gas rose by 38 billion cubic feet (vs 25 billion cf expected) for the week ended April 3. Reports claim that the weather will be colder for the next 2 weeks, which may give a boost in the price. Natural Gas ended the week on $1,747 per MMBtu (+7.77%).  

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Gold:

 Seven-year record-high has been achieved for the bullion’s futures this week (06/04-10/04) amid the global lockdown of economies and the stimulus initiated by the Central Banks, making the gold market one of the most investor-interesting this week. On Thursday, amid the -once more- massive fillings for unemployment benefits and the widespread measures taken by Fed, that announced as much as $2.3 trillion additional aid to provide stimulus in risky areas of the market, affected by the lockdown, gold futures maturing on June 20, as well the spot prices soared, closing at $1752,80 and $1541,80 accordingly. An even more strengthening data could be derived, if according to CNBC , somebody was comparing the jobless claims, that exceeded 16 million the last 3 weeks ,with the 151 million people on payrolls in the March employment report. Meaning that U.S has lost as much as 10% of its workforce, in just 3 weeks. Moreover, the economic environment, providing easier monetary policies and low borrowing costs, as well as stocks eliminating its dividends make gold even more attractive, as the fear of an even deeper slowdown is right after the corner. Even though, gold is considered, traditionally a safe-haven asset, gold investors are not anymore seeking for security and protection, but on the contrary, having gold hit a seven year high they are aiming on ROI. Any market that is able to swing 5% to 10% in either direction cannot be considered -in the short run- reliable due to its providing safety, but apparently this is a risk, gold investors are willing to endure. One thing can be said for certain, as long as FED is firing up its presses and injecting money into the economy, Gold demand will be aiming higher, day by day. 

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Pictures:

The view on economy – 01: photo by Marius Popa, Don Side Project Aberdeen, Scotland


Commodities graphs are provided by the authors of the report:

Mr. Kanatas Fotis and Mr. Spiros Kodoprias 

Students at the Maritime Department of the University of Piraeus