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Commodities

Oil prices rise as US inventories dip; CPI inflation in focus

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Investing.com– Oil prices rose in Asian trade on Wednesday as industry data showed a drop in U.S. inventories and boosted expectations of tighter supplies, although anticipation of key inflation data kept gains limited. 

Crude markets took some positive cues from Federal Reserve Chair Jerome Powell, who said that the world’s biggest economy remained resilient, while China’s outlining of plans for a massive 1 trillion yuan ($138 billion) bond issuance also factored into some strength. 

Expectations of tighter North American markets were also furthered by a swathe of devastating wildfires in Canada. Fort McMurray- a major Canadian oil sands city- saw about 6000 people evacuated due to an approaching fire. 

Still, gains in crude were limited by hotter-than-expected U.S. inflation data on Tuesday. The reading saw markets turn fearful of a stronger-than-expected inflation reading on Wednesday. 

expiring in July rose 0.4% to $82.70 a barrel, while rose 0.4% to $77.97 a barrel by 21:06 ET (01:06 GMT). 

US inventories shrink more than expected- API 

Data from the (API) showed on Tuesday that U.S. oil inventories shrank 3.1 million barrels in the week to May 10, more than expectations for a draw of 1.1 million barrels. 

The data also showed a decline in gasoline stockpiles, while distillates rose by 349,000 barrels.

The reading spurred some hopes that U.S. fuel demand was picking up with the advent of the travel-heavy summer season- a trend that could help tighten global crude supplies, even as U.S. production remains at record highs.

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Shrinking U.S. inventories and potential supply disruptions in Canada also present a tighter outlook for North American crude markets. 

The API data usually heralds a similar reading from official , which is due later on Wednesday. 

Inflation jitters in play as CPI data looms

Oil markets remained on edge ahead of key U.S. CPI data due later on Wednesday, especially as PPI data for April read hotter-than-expected.

Traders were wary of any more signs of sticky U.S. inflation, which are likely to push the Fed into keeping interest rates high for longer- a scenario that bodes poorly for crude.

High rates are expected to stall global economic activity and potentially dent demand for oil. 

 

Commodities

Gold and silver to continue to appreciate – Julius Baer

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Investing.com – With another day of gains in and futures, the Swiss group Julius Baer has decided to change its outlook on commodities to constructive. The group now believes that both metals have the potential for further increases, as stated in a note sent to clients and the market on Friday morning.

The group mentioned that, in addition to U.S. monetary policy, the gold market is still dominated by Asia. “We have to recognize that the region’s willingness to pay for gold as a hedge against economic and geopolitical risks appears even greater than we expected,” said Carsten Menke, head of next-generation research at Julius Baer.

Weaker-than-expected U.S. economic data have revived hopes for interest rate cuts by the Federal Reserve (Fed, the U.S. central bank), boosting gold and silver prices. This could “be the missing incentive for safe-haven seekers in the Western world to return to the markets,” he added.

Central Bank Purchases in Focus

Central banks have been buying gold more for geopolitical reasons than economic ones, according to Julius Baer. In China, for example, there is a desire to reduce dependence on the U.S. dollar – important for avoiding potential sanctions.

The People’s Bank of China is believed to be responsible for at least 30% to 50% of all central bank purchases over the past two years. Although it shows signs of being price-sensitive, “its willingness to pay has increased as gold prices rise,” notes Julius Baer. It is expected that other monetary authorities will follow the same steps, moving away from the U.S. dollar.

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Commodities

Goldman Sachs discusses what’s next for natural gas prices

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Over the past three weeks, US prices have surged 30% to above $2.50 per million British thermal units (mm/BTU), fueled by production declines and increased feedgas demand for liquified natural gas (LNG) exports.

Moreover, recent producer cuts, maintenance events, and Freeport LNG’s normalization of gas demand post-outage have contributed to this rise. Cheniere’s announcement of no heavy maintenance for its liquefaction trains this year also supports higher prices.

In a Thursday note, Goldman Sachs strategists said the return of gas prices above $2/mmBtu aligns with their expectations, as production curtailments “would ultimately lead to lower storage congestion risks for this summer.”

“That said, we see only limited further upside from current levels, with stronger gas prices risking a return of congestion concerns,” they added.

Goldman notes that prices above $2/mmBtu reduce gas competitiveness compared to coal, with a $0.50/mmBtu increase potentially cutting gas demand by 1 billion cubic feet per day (Bcf/d), especially in shoulder months.

Moreover, higher prices may prompt the restart of previously shut-in wells. EQT (ST:), the largest producer in the Appalachia region, indicated it would resume production if prices sustainably exceed $1.50/mmBtu. And while Appalachia prices haven’t risen as much as NYMEX, the local hub has averaged $1.44/mmBtu month-to-date, up 10¢ from last month, strategists highlighted.

Elsewhere, European gas prices have also risen this summer, though less sharply than in the US.

Title Transfer Facility (TTF) prices increased 18% over the past three months to around 30 euros per megawatt-hour (MWh), holding steady in May.

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However, unlike the US market, this rally lacks fundamental support, with Northwest (NW) European gas storage at record-high levels, Goldman strategists pointed out.

“To be sure, NW European LNG imports have remained weak relative to last year – and are likely to get weaker in the coming weeks owing to a seasonal decline in global LNG production, exacerbated by outages at Australia’s Gorgon export project,” they said.

“Going forward, we expect healthy non-European demand for LNG to continue to incentivize a decline in European LNG imports vs last year,” they continued.

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Commodities

Gold prices trim some weekly gains on tempered rate cut hopes

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Investing.com– Gold prices fell slightly on Friday, trimming some of their gains for the week as comments from a slew of Federal Reserve officials offered a more sobering outlook on interest rate cuts. 

The yellow metal had risen to nearly $2,400 an ounce this week in the immediate aftermath of some soft U.S. economic readings. But it pulled back from these levels on Thursday and Friday.

steadied at $2,377.40 an ounce, while expiring in June fell slightly to $2,381.10 an ounce by 00:19 ET (04:19 GMT). 

Gold retreats as Fed officials downplay rate cuts, but weekly gains due

The yellow metal fell on Thursday after a string of Fed officials cautioned against bets on immediate reductions in interest rates. 

Several members of the central bank’s rate setting committee said the central bank will need much more convincing that inflation was coming down beyond a marginally soft inflation reading for April. 

This saw traders begin pricing out some expectations for a rate cut in September. The and also rebounded from earlier losses this week. 

Still, some softer-than-expected readings put gold on course for a 0.7% weekly gain. 

The yellow metal was also in sight of a record high of above $2,430 an ounce, although it appeared unlikely the level would be met in the near-term. 

Other precious metals retreated on Friday, but were set for bumper weekly gains. fell 0.2% but were trading up 6.2% for the week, while fell 0.4% but were up 4.5% this week. 

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Copper mixed amid middling China cues

Among industrial metals, one-month copper futures tumbled from two-year highs tracking middling economic data. But three-month copper futures pushed higher and were set for a stellar week as markets bet on tighter supplies and an eventual demand recovery in the coming months. 

on the London Metal Exchange rose 0.6% to $10,445.0 a ton, while rose 0.3% to $4.8935 a pound. 

Data from China on Friday painted a mixed picture of the economy. While grew more than expected, growth slowed and shrank at an accelerated pace. Growth in Chinese also slowed.

The readings presented a muddled outlook for the world’s biggest copper importer, as it rolled out more stimulus measures to shore up growth.

Three-month copper futures gained on the prospect of a demand recovery, and were up nearly 4% this week. They were also at two-year highs. 

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