Commodity Corner: Slippery Dip – ShareCafe

By on August 7, 2022 0

Commodity prices improved a bit on Friday and for the week, although oil again saw a solid fall and petrol prices here in Australia are now well below $1.70 a litre.

Major oil contracts for West Texas Intermediate and Brent crudes are now down 13% to more than 15% in the past fortnight.

Brent crude fell 8.7% to settle at US$94.92. This was after the previous week’s 4.2% drop.

U.S. West Texas crude fell 9.7% to settle at US$89.01 – the first time it has finished below US$90 a barrel since early February (before the Russian invasion of Ukraine at the end of the same month). This was after a 6.75% drop the previous week.

Out of the blue, the US oil rig count saw its biggest drop in more than 9 months and the first weekly drop in 10 weeks.

Oil services group Baker Hughes said there was a seven drop in the number of rigs to 598 in the week ending last Friday.

Gas rigs, however, rose by four to 161, their highest level since August 2019.

That saw oil and gas combined fall by three to 764, bringing the total number of rigs to 273, or 56%, from the same period last year, Baker Hughes said.

Last week’s weakness came despite a small increase of 100,000 barrels per day in the OPEC+ group’s global production cap. This was announced on Thursday and appears to be triggering a drop in oil prices.

Oil prices fell to their lowest since early February on Thursday due to an unexpected increase in U.S. oil and gasoline inventories, seen as a sign of weakening demand as the Federal Reserve continues raise interest rates to slow inflation.

But the 528,000 additional jobs in July and the drop in the unemployment rate to 3.5% (from 3.6%) will change the view of demand and the health of the economy.

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Comex gold fell back from a one-month high on Friday, dropping below US$1,800 after the unexpectedly strong rise in US jobs in July.

Gold for December delivery closed down $15.70 at US$1,791.20 an ounce. This left gold up 0.57% for the week.

The price of the metal fell after the United States announced that it created 528,000 new jobs in July, more than double the consensus estimate of a rise of 258,000 and pushing the unemployment rate up to 3.6 % to 3.5%.

The US dollar rose on the report, making gold more expensive for international buyers. The ICE dollar index was last seen up 0.97 points at 106.56.

Bond yields also climbed, bearish for gold since it offers no interest. The US 10-year note was last seen at 2.83%.

Silver Comex fell 1.67% for the week to end at US$19.82 an ounce. Comex copper fell 0.9% to end at US$3.553 a pound.

Iron ore prices (for 62% Fe fines) fell around 6% to US$108.70 on the Singapore commodity futures market from US$114.99 a tonne on Friday previous.

Newcastle thermal coal futures fell more than $70 a tonne to $335 a tonne on Friday night for the October ICE contract.

Wheat fell nearly 5% to 780 US cents a bushel on Friday in its third straight week of declining trading volumes, as global hedge funds pulled out of the market and exports slid from l ‘Ukraine.

Ukraine’s Ministry of Agriculture reported a 45% year-on-year decline in seed harvests, averaging 3.64 tonnes per hectare. This suggests that the next batch of plantings will be much smaller than normal.

Three ships with nearly 60,000 tonnes of corn left the port of Odessa in a bid to ease pressure on grain demand.

Corn fell 2.80% to 602 cents a bushel and soybeans fell 2.4% to US$14.56 a bushel.