Commodities Report 20 – 24.4.2020

Oil:

A historic week has been marked for oil as the WTI futures for the front month (May) have been plunged almost 315 % reaching prices below zero for the first time ever at -$38.76 on Monday, naming it “Black Monday”. These contracts where expiring on Tuesday and thus, traders were eager to offload them to avoid physical delivery of the crude oil, in times where stockpiles are full and incapable of storing more oil. After the historic crash, prices went up on Wednesday after President Trump threatened Iran to attack every Iranian ship that harasses U.S. vessels at sea. The rally was also backed by short-covering after the historic plunge and on hopes that U.S. drillers will cut production a lot sooner that expected. These developments marked a 50% two-day gain for oil settling the WTI at $17.89. Both benchmarks marked a negative weekly performance as Brent was settled at $21.91 (-21.97%) and WTI $17.19 (-5.91%). 

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Natural Gas:

Natural gas rallied on Monday while oil was marking its worst day ever, after oil and gas lobbyists are now pushing even more for financial aid to repay their debts and overcome the financial hit from the COVID-19 and the lockdowns. Additionally, new reports claim that natural gas may be the biggest winner of the oil crash as the coming production cuts and closing of oil wells due to low prices can only boost demand for the gaseous commodity. Additionally, weather forecasts for the upcoming two weeks indicate lower temperatures and thus, the sentiment remains positive for the commodity. Natural Gas futures marked a negative week closing on Friday at $1.715 (-2.17%). 

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Gold:

Gold posed a mildly bullish week, as it has risen more than 2%, hitting on Thursday its highest in more than a week, following the report from the U.S government for people seeking unemployment benefits. Earlier in the week, gold performed a double day rally, on Wednesday and Thursday, after the initial slump of Oil futures expiring in May, to negative prices. Initially, the oil crash benefited the U.S dollar, traditionally a competitor to gold, combined with a roll over in market’s risk sentiment. Hence, the bullion momentarily eased below the psychological barrier of $1.700, but soon retrieved it. As of the closing of the week, the yellow metal slipped a bit on Friday, mainly explained by the investors’ intentions to liquify their profits. 

On a macro scale, concerns over the global economic slowdown, as well as the stimulus package from the Central Banks and the weak sentiment for major currencies, are creating a proving but fertile ground for safe haven’s buyers. As long as governments are trying to mitigate the impact of the global lockdown and stimulate with widespread packages, gold will keep on being viewed as the hedge against inflation and currency debasement. As Indicative as it might be, the holdings of the world’s gold-backed exchange-traded fund, SPDR Gold Trust, rose to a near 7-year high , while gold traded in euros , hit an all-time peak. Many advocate that the only thing that could derail the gold’s rally might be a vaccine for Covid-19. 

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The commodities weekly report is provided by 

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

  

Charts provided by Investing.com