Commodities Report 4.5 – 8.5.2020

Oil:

  

The previous week was a good one for oil as it brought positivity back in the market. After a few countries have lifted lockdowns on views to reopen the economy after the COVID-19 precaution measures, satellite pictures show that traffic activity is gradually rising giving hope that the bottom in the market has been left behind. On Tuesday, the EIA announced a rise in Crude Oil Inventories of 4.590M vs 7.759M expected, making clear that the stocks do not fill up as quickly as originally feared. According to Rystad Energy the demand destruction has found a floor and better months are ahead. According to UBS, it is expected that the oil market will rebalance in 2020 Q3, while on Q4 undersupply will be present in the market. Additionally, the real effect of the historic OPEC+ deal, which has been implemented on May 1st , is starting to kick in, pushing the prices upwards. 

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Earlier during the previous week, Iraq, the second largest oil producer on OPEC, gave vote of confidence on the Prime Minister Mustafa al-Kadhimi and most of the ministers but postponed the vote for the oil minister for next week. Moreover, state-owned Saudi Aramco, hiked its OSP (Official Selling Prices) against trader’s expectations, giving a sign that the also believe demand will spike very soon. Finally, on Friday, more U.S. oil producers announced that they are scaling back their production due to low prices, giving additional hope for a quicker demand and supply rebalance. Both benchmarks closed the week positively, with WTI 24.47% at $24.62 and Brent 16,79% at $30.88. 

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Natural Gas:

A turbulent previous week for Natural Gas forced it to close negatively despite big fluctuations. The price rallied on Tuesday at $2.155 after an explosion occurred on Texas Eastern Transmission (TETCO) pipeline in Kentucky, managing a strong hit in supply. According to the U.S. Energy Information Administration, demand was lower 15.3% for the week ending 7/5 mainly because the significantly lower consumption over the previous weekend. According to IHS Markit, supply fell 1.4% while production fell 1.3% both compared to the previous week. As far as net injections are concerned, they totaled 109 bcf this week, significantly greater than the 5-year-average of 74 bcf, while natural gas stocks were 2.319 bcf again grater that the 5-year-average. Adding a bit of hope in the market, on Friday, bot U.S. and China affirmed to support the Phase-1 trade deal, originally signed in early January which indicates, amongst others, China to buy a big amounts of Natural Gas. Natural gas closed the week negatively on $1.824 down -3.49%. 

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Gold:

A historic unemployment report, fears about the initiation of another round of the trade war, as well interest rates approaching zero were the headlines that defined the movement of the yellow metal, that surged by the end of the week at $1704,80 declining about 0,28% after reaching on Friday $1733. Gold is increasingly receiving mainstream attention as a portfolio alternative in the face of low-yielding bonds and ever-before changing monetary conditions, as well as geopolitical tensions. Even though 20.5 million jobs were lost in April, peaking the unemployment rate at 14,7% in the U.S., expectations were underachieved, a bullish component for the equity market.  However, the primary drivers for strength in gold, interest rates at almost zero, massive spendings and deep concerns for the shape of the recovery remain the prospects powering a gold soar in the mid-term. Lower U.S. interest rates pressure the dollar -dollar index settled below the psychological barrier of 100- and bond yields, increasing the appeal of the non-yielding bullion. On a more bullish note for gold, Sino-U.S frictions appeared to reemerge in the times of the pandemic, as president Trump threatened new tariffs, however the tensions seem to ease up after Beijing stated that it is honoring its part of the Phase 1 trade deal. Gold closed slightly positively the week at $1,704.80 up 0.23%.

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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