Commodities Report 11.5 – 15.5.2020

Oil:

  

Crude oil futures extended previous week’s gains amid a combination of demand increase and supply decrease. On Monday, oil-producing countries like United Arab Emirates, Saudi Arabia and Kuwait announced additional cuts of 1.18mb/d, starting form June, on top of their initial OPEC+ cuts. Additionally, both Norway and the US continue the voluntary cuts to spike up the prices, while the Energy Information Administration (EIA) announced that non-OPEC cuts exceeded 3mb/d and more are expected. On the demand side, data from China show that industrial activity is increasing and thus, demand is rising. As far as the US is concerned, Trump administration announced that there is no intention for further stimulus on the shale industry, pledging only to push for further oil buys in order to fill the Strategic Petroleum Reserve (SPR) according to the US Energy Secretary, Dan Brouillette . On Wednesday, EIA announced that US crude oil inventories beat estimates (-0.745M actual vs 4.147M forecast) showing that stockpiles actually fell, giving a boost in the price. Concluding, according to HSBC, Goldman Sachs and MUFG (Bank of Tokyo) the oil recovery will take until the end of 2021 or at the beginning of 2022. Goldman also commented that due to lower Capital Expenses as far as the US producers are concerned, further decline in production is a reality. Both Benchmarks closed positively the week with Brent at $32.84 (+6.04%) and WTI at $29.71 (+20.09%) on a weekly basis.  

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Natural Gas:

  

Natural Gas experienced a loose week with increasing losses from last week’s highs around the $2.100 MMbtu which was 3 month’s highs. Data from the Energy Information Administration (EIA) showed another 3-digit gain in net ejection on inventories at 103 bcf for the week ending on May 8th, sending the prices lower. Adding fuel to the fire, hotter season’s weather and the economic contraction due to COVID-19 are destroying demand. On the bright sight for NG’s price, EIA expects that stockpiles net injections are going to be lower because of the production declines. The commodity experienced a weekly loss of 10.26% settling at $1.636 MMbtu. 

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Gold:

  

Economic and political headlines, as well as dismal U.S data bolster this week’s yellow metal’s demand, as spot Gold finished the week on Friday in path for a weekly gain above 2% closing at 1,743$, in the same time that gold futures rising above the $1750 mark at $1753.15 finishing strong an inevitably bullish week. The economic data from the west side of the Atlantic on Friday was mostly downbeat, with U.S Retails sales recordlike tumbling 16.4% in April. U.S Industrial output, accordingly, posed an 11.2% contraction in the same month, although the preliminary reading of the consumer sentiment in May was slightly better than the month before, according to Michigan University. The metal was additionally influenced in upwards movements after the rising tension occurred in the Sino-American relations after the President Trump blocked shipments of semiconductors to Huawei Technologies among his rhetorical of blaming China for mishandling the Covid-19 outbreak. Enhancing the bullish sentiment, China’s retail sales report was still down 7.5% yoy, a month after the Republic has lifted almost all of its restrictions. On the long run, gold’s market sentiment is adequately positive, as long as the major Central Banks continue to provide stimulus packages and try to increase the money supply, as well as the aftermath of the virus in the world’s largest economies is yet to be totally discovered. Confidently, eyeing on the presidential elections later this year, geopolitical tensions will keep on rising and striking the headlines, reassuring the non-yielding bullion as the major safe haven.

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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

  

  Pictures:

Oil drilling rigs on sunset: Photo by zbynek-burival-GrmwVnVSSdU on Unsplash

Burning gas: Photo by Parvesh Kumar on Unsplash

The ship of gold: detail of photo by Ramona Popa