Commodities
Energy & precious metals – weekly review and outlook
© Reuters.
Investing.com — There are four more weeks to this year’s Labor Day – the timeline typically used to ascertain the peak for summer oil demand; typically, because oil demand itself is so dynamic that it can go any way any time of the year.
In seven weeks, the Federal Reserve will make another decision on . After benign U.S. jobs growth in July, economists expect the central bank to pause again on its monetary tightening.
But while the pace of U.S. jobs growth is retreating and wage pressures might cool next, energy-fueled inflation could be a new worry for the Fed with crude prices already at three-month highs and threatening to climb further. And so, yes, the Fed could surprise with its .
The North Atlantic hurricane season officially began in June. But tropical cyclone activity – which can cause damage to oil industry installations in the U.S. Gulf Coast of Mexico -— sometimes occurs as late as end-November. The peak of the Atlantic hurricane season is usually before mid-September, with most activity occurring between mid-August and mid-October.
And by Oct. 4, it’ll be time for the Saudis to decide if they’re going to pull another million barrels per day off their November production. With their mania over cuts to push up barrel prices, the kingdom is expected to continue choking the crude market.
Amid all these is China’s oil demand, which still raises a big question mark.
Bloomberg reported earlier this week that China’s appetite for fuels and other oil-derived products such as plastics may have peaked for this year as economic woes in the No.1 oil importer continue to stand in the way of a full rebound from Covid Zero.
While recent headline numbers for Chinese crude imports pointed to robust oil demand, much of that supply has been stockpiled rather than turned into gasoline and diesel, according to analysts. The nation’s economic recovery continues to show signs of strain this year through weak indicators across manufacturing and infrastructure sectors, weighing on the outlook for commodities.
Also, fewer Chinese tourists traveling overseas this year is said to be the main reason why jet fuel shipments have yet to return to peak.
“If you take the different supply-demand timelines for crude in the near term to reach a consensus, you get underwhelming consumption for fuels,” said John Kilduff, partner at New York energy hedge fund Again Capital. “It’s not surprising that the Saudis want to create a highly-choked supply situation instead to mask this and keep the upward pressure on oil prices.”
have fallen by a net 2.322M barrels over the past six weeks while , the raw component for and diesel, have gained by 2.867M in the same period.
The American Automobile Association, or AAA, says gasoline price increases might actually be benign this summer despite initial worries they could reach toward the June 2022 record high of $5 a gallon.
The national average for a gallon of gas has continued its summer U-turn, the AAA said in a blog post Monday, while noting that price increases have slowed and more relief could be on the way.
Oil: Market Settlements and Activity
Like an encore demanded each time OPEC gathers, the Saudi production cuts gambit rose to the occasion again this week, with the kingdom announcing ahead of its monthly meeting on Friday that it will drop another million barrels per day from its September output.
U.S. West Texas Intermediate, or , crude did a final trade of $82.64 – up $1.09, or 1.34%, after the Saudi announcement.
The session high for WTI was $83.23, a peak not seen since early April. For the week, the U.S. crude benchmark rose 2.8%, adding to July’s gain of nearly 16%.
London-based crude closed the session at $86.15 – up $1.01, or 1.19%.
The intraday peak for Brent was $86.64 – the highest since mid-April. For the week, the global oil benchmark gained almost 2%, after running up nearly 14% for July.
Oil: WTI Price Outlook
While the momentum in WTI suggested it could ride till $86 before serious resistance emerged, the rally could reach exhaustion earlier, technical chartist Sunil Kumar Dixit said.
“WTI has the appearance of an overbought market although its 4-Hour Stochastics still have room for upside, with open targets for the 100-day SMA, or Simple Moving Average, of $85.45 and the monthly Middle Bollinger Band of $86.90,” said Dixit, who’s chief technical strategist at SKCharting.com.
While a previous correction towards $78.70 had rebooted WTI’s rally, “a settlement below the 5-day EMA, or Exponential Moving Average, of $81.45 will be an initial sign of exhaustion,” Dixit added.
Gold: Market Settlements and Activity
Most-active on New York’s Comex showed a final trade of $1,978.20 an ounce on Friday, after officially settling the session at $1,976.10 – up $7.30, or 0.4%, on the day and 0.9% for the week.
The , which reflects physical trades in bullion and is more closely followed than futures by some traders, settled at $1,942.90.
Gold: Price Outlook
As spot gold extended its decline for a third week running, it could be seen completing a so-called Wave 5, which, if confirmed by consistently higher highs, would resume the yellow metal’s uptrend, said Dixit of SKCharting.com.
“Initially, spot gold trading above the 50-Day EMA, or Exponential Moving Average, of $1,949 and the Daily Middle Bollinger Band of $1,954 needs to be cleared, followed by buying momentum above the 4-Hour 100 SMA, or Simple Moving Average, of $1,958,” Dixit said.
“If gold manages to show strength above these critical levels, the next challenge will come at the 100-day SMA of $1,969. This is where the bulls and bears will have a tough time to decide who is in control.”
A rejection from this point, or the earlier $1,954-$1,958 range, will indicate victory for the bears, he added.
Natural gas: Market Settlements and Activity
The gas contract on the New York Mercantile Exchange’s Henry Hub did a final trade of $2.579, after officially settling Friday’s session at $2.577, up 1.2 cents, or 0.5%, on the day.
For the week, September gas was down 2.3%.
Natural gas: Price Outlook
Natural gas futures remain neutral, trading sideways with temporary bearish consolidation below the 200-day SMA of $2.65 on 4 Hour time frame, noted Dixit of SKCharting.
“As long as the 100-day SMA which aligns with Weekly middle Bollinger Band $2.40 remains intact with Daily/Weekly closing basis, resumption of upward rebound will remain valid which initially targets retesting swing high $2.84 followed closely by psychological handle $3.00,” he said.
Decisive breakout below $2.40 will turn momentum bearish with potential drop to $2.10 followed by $2, Dixit added.
Disclaimer: Barani Krishnan does not hold positions in the commodities and securities he writes about.
(Reuters) – Gold hit a record high above $2,600 per ounce on Friday, as the prospect of more U.S. interest rate cuts and global geo-political uncertainty boosted its appeal.
Bullion has risen more than 26% so far this year, and as market bulls lock in further gains, another milestone of $3,000 per ounce is in focus.
Here are the different avenues for investing in gold:
SPOT MARKET
Large buyers and institutional investors usually buy gold from big banks. Prices in the spot market are determined by real-time supply and demand dynamics.
London is the most influential hub for the market, largely because of the London Bullion Market Association (LBMA). The LBMA sets standards for gold trading and provides a framework for the OTC (over-the-counter) market, facilitating trades among banks, dealers, and institutions.
China, India, the Middle East and the United States are other major gold trading centres.
FUTURES MARKET
Investors can also get exposure to gold via futures exchanges, where people buy or sell a particular commodity at a fixed price on a particular date in future.
COMEX (Commodity Exchange Inc), a part of the New York Mercantile Exchange (NYMEX), is the largest market in terms of trading volumes.
Shanghai Futures Exchange, China’s leading commodities exchange, also offers gold futures contracts. The Tokyo Commodity exchange, popularly known as TOCOM, is another big player in the Asian gold market.
EXCHANGE TRADED PRODUCTS
Exchange Traded Products (ETPs) or Exchange Traded Funds (ETFs) issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself. [GOL/ETF]
ETFs have become a major category of investment demand for the precious metal.
Global physically backed gold ETFs attracted a fourth consecutive month of inflows in August after North American and Europe-listed funds increased holdings, the World Gold Council (WGC) said.
BARS AND COINS
Retail consumers can buy gold from metals traders selling bars and coins in an outlet or online. Both gold bars and coins are effective means of investing in physical gold.
DRIVERS:
INVESTORS AND MARKET SENTIMENT
Rising interest from investment funds in recent years has been a major factor behind bullion’s price moves.
Sentiment driven by market trends, news, and global events can also lead to speculative buying or selling of gold.
FOREIGN EXCHANGE RATES
Gold is a popular hedge against currency market volatility. It has traditionally moved in the opposite direction to the U.S. dollar as weakness in the U.S. unit makes dollar-priced gold cheaper for holders of other currencies and vice versa.
MONETARY POLICIES AND POLITICAL TENSIONS
The precious metal is widely considered a “safe haven”, bought during uncertain times in a flight to quality.
Major geopolitical events, such as extended conflicts in the Middle East and Europe have added to uncertainties for global investors and burnished gold’s appeal.
Policy decisions from global central banks also influence gold’s trajectory. Lower rates reduce the opportunity cost of holding gold, since it pays no interest.
Gold’s latest rally was triggered after the U.S. Federal Reserve began its easing cycle with an outsized half-percentage-point cut on Wednesday.
CENTRAL BANK GOLD RESERVES
Central banks hold gold as part of their reserves. Buying or selling of the metal by the banks can influence prices.
Central bank demand has been robust in recent years because of ongoing macroeconomic and political uncertainty, analysts have said.
More central banks plan to add to their gold reserves within a year despite high prices for the precious metal, the World Gold Council (WGC) said in its annual survey in June.
Investing.com– Oil prices retreated Friday, but were still headed for a weekly gain as a bumper U.S. interest rate cut helped quell some fears of slowing demand.
At 08:20 ET (12:20 GMT), fell 0.6% to $74.47 a barrel, while dropped 0.5% to $70.79 a barrel.
Oil heads for weekly gains on rate cut cheer
Crude prices have staged a strong recovery from near three-year lows hit earlier in September, with a bulk of their rebound coming this week as the dollar retreated on a by the Federal Reserve.
was trading up about 3.95% this week, while WTI futures were up 4.4%.
Increased tensions in the Middle East also aided crude, after Israel allegedly exploded pagers and walkie talkies belonging to Hezbollah members, sparking vows of retaliation. Fighting in and around Gaza also continued.
A softer aided crude prices after the Fed cut interest rates by the top end of market expectations and announced an easing cycle, which traders bet will help spur economic growth in the coming quarters.
Lower rates usually bode well for economic activity, which in turn is expected to buoy crude demand.
China demand concerns persist
But China remained a key point of contention for crude markets, as economic readings from the world’s biggest oil importer showed little signs of improvement.
The People’s Bank of China kept unchanged on Friday, despite mounting calls on Beijing to unlock more stimulus for the economy.
Data released earlier in September showed Chinese refinery output slowed for a fifth straight month in August, while the country’s oil imports also remained mostly weak.
Concerns over China dragged oil prices to a near three-year low earlier this month, and have limited any major recovery in crude.
“China has obviously been the key concern when it comes to demand, but there have also been reports of refiners in Europe cutting run rates due to poor margins,” said analysts at ING, in a note.
(Ambar Warrick contributed to this article.)
By Arunima Kumar
(Reuters) -Oil prices eased on Friday, but were on track to register gains for a second straight week following a large cut in U.S. interest rates and declining global stockpiles.
Brent futures were down 50 cents, or 0.67%, at $74.38 a barrel at 1004 GMT while U.S. WTI crude futures fell 48 cents, or 0.65%, at $71.47.
Still, both benchmarks were up 3.7% and 4% respectively on the week.
Prices have been recovering after Brent fell below $69 for the first time in nearly three years on Sept. 10.
“U.S. interest cuts have supported risk sentiment, weakened the dollar and supported crude this week,” UBS analyst Giovanni Staunovo said.
“However, it takes time until rate cuts support economic activity and oil demand growth,” he added, regarding crude’s more muted performance so far on Friday.
Prices rose more than 1% on Thursday following the U.S. central bank’s decision to cut interest rates by half a percentage point on Wednesday.
Interest rate cuts typically boost economic activity and energy demand, but some also see it as a sign of a weak U.S. labour market.
The Fed also projected a further half-point rate cut by year-end, a full point next year and a half-point trim in 2026.
“Easing monetary policy helped reinforce expectations that the U.S. economy will avoid a downturn,” ANZ Research analysts said.
Also supporting prices were a decline in inventories, which fell to a one-year low last week. [EIA/S]
A counter-seasonal oil market deficit of around 400,000 barrels per day (bpd) will support prices in the $70 to $75 a barrel range during the next quarter, Citi analysts said on Thursday, but added prices could plunge in 2025.
Crude prices were also being supported by rising tensions in the Middle East. Walkie-talkies used by Lebanese armed group Hezbollah exploded on Wednesday following similar explosions of pagers the previous day.
Security sources have said the Israeli spy agency Mossad was responsible, but Israeli officials have not commented on the attacks.
China’s slowing economy also weighed on market sentiment, with refinery output in China slowing for a fifth month in August and industrial output growth hitting a five-month low.
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