Commodities Report 13 – 17.4.2020

Oil:

After OPEC+ decided last week to cut production by 9.7 million bpd to save the industry from tumbling prices and decreasing demand, oil prices continued to decrease, mainly due to decreasing demand from the COVID-19 lockdowns worldwide. As far as the deal is concerned, Russia and Saudi Arabia will contribute almost 50% of the cuts while U.S., Canada, Brazil and Mexico will cut 3.8 million bpd. The deal indicates that the cuts will be reduced in June and in in April 2022. According to PetroMatrix, oil stockpiles in the U.S. will reach their full capacity in two weeks putting more pressure in the production, as no more space will be available. Additionally, OPEC’s forecast that demand will decrease further, resulted in WTI breaching downwards its technical resistance level of $20 pb. Additionally, oil prices did not react as expected on Trump’s three-stage process for ending lockdown and remained below $20, and in combination with China’s GDP Q1 shrinkage for the first time since 1992, pessimism remain at the oil market. As practically at the moment the market is flooded with crude oil, both Russia and SA gave a glimpse of hope as they stated that the monitor the market closely and are ready to take further action if needed. As of Friday 17, WTI was down -20.12% at $18.18 and Brent down -9.97% at $28.34 on a weekly basis. 

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Natural Gas:

Pessimism continue to at the beginning of the week as far as the Natural Gas market is concerned due to upcoming better weather, rising COVID-19 global cases and worldwide lockdowns as the Natural Gas futures for May 2020 reached the lows of $1.562 on Thursday. Since then and until Friday, the last trading day, futures managed a staggering rise, closing positively the week. The rally came as a result of plans form President trump to re-open the U.S. economy and upcoming lifting lockdowns in both China and India, two of the biggest NG importers and consumers. Additionally, natural gas found another stimulus on gas producers on Friday, as there is hope for production cuts as more and more rigs are closing down affecting the flow of the commodity and as a result, pushing higher the prices. Natural Gas futures for May 2020 were up 1,56% at $1.760.

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Gold:

The yellow commodity reached 7-1/2 year highs on Tuesday at $1,783.65 proving its safe haven capacity. Fears that the Jobless Claims data will make the economic situation even worse, fueled the rally. Eventually the U.S. economy lost additional 5,245k workers. Additionally, according to Phil Streible, chief market strategist at Blue Line Futures, the fluctuations in the stock market and the upcoming inflation, are some more reasons for the gold rally. On Friday, Trump’s plan to re-open the economy led investors to riskier option like stocks and thus, gold handed over the previous days’ gains. On a weekly basis, gold was down -2.64% at $1,694.40.

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The commodities weekly report (text and diagrams) is provided by 

Mr. Fotis Kanatas and Mr. Spiros Kodoprias - Students at the Maritime Department of the University of Piraeus