• Deflationary pressures continue across many markets
  • Crude oil recovers on hopes of a coordinated production cut, natural gas falls
  • Precious metals move lower with the most significant losses in platinum and palladium
  • Agricultural commodities decline
  • The dollar index and digital currencies post gains while stocks slip lower

The story of this week:

Hope For Crude Oil?

On March 30, the price of nearby May crude oil futures on NYMEX reached the most recent low when it traded to $19.27 per barrel. The prices of all assets had declined throughout March as the global pandemic spread across the globe. However, the decision by OPEC and Russia to address demand destruction by flooding the world with petroleum exacerbated the problems facing asset markets. The Saudis and Russians made a move that they had hoped would push US producers from the oil market to increase their respective market shares. However, the price fell so far that the KSA and Russia shot themselves in the foot.

The US producers are on the verge of bankruptcy. KSA depends on a Brent price above $80 per barrel to balance its budget, and Russia relies on oil revenues. At the lows around the $20 per barrel level, all three of the world’s leading producers were suffering at a time when governments are dealing with the fallout of a rising number of cases of Coronavirus. The decline in crude oil may have finally put the international oil cartel to sleep. A new triad of producing nations may emerge from the rubble of the lowest oil price since 2002.

On April 2, US President Donald Trump tweeted:

Source: Twitter

The message from the leader of the world’s leading oil-producing nation resonated with the crude oil futures market.

Source: CQG

As the daily chart of May NYMEX crude oil futures highlights, the price of the energy commodity rose from a low of $19.27 on March 30 to a high of $29.13 per barrel on Friday, April 3, a recovery of 51.2%. The May contract settled near the high at $28.34 at the end of the week. On Friday, Russian President Vladimir Putin said,

We are ready to reach terms with partners within the framework of OPEC+ and are ready to cooperate with the United States on this issue. I believe that it is necessary to combine efforts in order to balance the market and reduce output.” Russia could agree to participate in a 10 million barrel per day production “on a partnership” basis, according to the Russian President. He went on to say that Russia would be comfortable with a price around $42 per barrel. The price dropped from that level after the March 6 meeting of OPEC plus one.

In a sign of continued financial problems for US producers. The XLE continued to lag the percentage gain in the crude oil price.

Source: CQG

The chart of the S&P Energy Select SPDR moved from its recent low of $22.88 on March 18 to the $29.83 level on Friday, April 3, a rise of 30.4%.

Volatility in markets is a paradise for nimble traders with their fingers on the pulse of markets. Approach markets with a plan for risk and reward, keep stops tight and take profits when they are on the table. Massive price variance will continue in markets as the world battles a war against Coronavirus with significant ramifications for the US and global economies.

Highlights in commodities:

  • April gold rolls to June and edges 0.50% lower on the week, settling at $1645.70 per ounce
  • May silver falls only 0.28% as the precious metal settled at $14.494 per ounce on April 3
  • April platinum rolls to July and drops 3.29% on the week. July platinum was at an $927.60 per ounce discount to June gold futures, which widened since last week
  • June palladium declines 5.42% after an over 44% gain last week and settled at $2,106.00 per ounce. Rhodium fell $2000 per ounce to a midpoint of $6,000 over the past week
  • May copper was 0.94% higher to the $2.1925 level since March 27
  • May iron ore futures moved 2.33% lower over the past week
  • The BDI rose 7.22% since March 27 to the 624 level
  • May Rotterdam coal fell 10.75% since last week
  • May lumber plunged 15.19% lower since March 27 and was at the $264 per 1,000 board feet level
  • May NYMEX crude oil exploded 31.75% higher and closed the week at $28.34 per barrel
  • May Brent crude oil rolled to June and recovered by 23.04% as contango made the rise in Brent lower than WTI
  • The premium for Brent over WTI in June closed Friday at the $3.49 level as the spread moved $0.81 higher since last week
  • May gasoline rose 12.71% while May heating oil futures posted a marginal 0.20% gain over the past week
  • The gasoline crack spread in May was 78.75% lower since last week. May heating oil crack moved 24.87% lower since March 27 as the products underperformed crude oil futures
  • Natural gas fell 2.99% on May futures closing the week at $1.6210 per MMBtu. The EIA reported a withdrawal of 19 bcf from storage on Thursday for the week ending on March 27
  • May ethanol fell 13.33% on the week
  • May soybeans fell 3.09% since last week
  • May corn moved 4.41% lower on the week
  • CBOT May wheat was 3.85% lower since last week. May KCBT wheat trading at a 77.25 cents discount under May CBOT wheat as the discount moved 7.25 cents towards historical norm since last week
  • May sugar fell 7.12% since March 27 and closed at 10.31 cents per pound
  • May coffee posted an 0.82% loss since last week
  • May cocoa rose 0.31% since March 27
  • May cotton fell 0.68% since last week as the fiber futures were at the 50.98 cents per pound level after probing below the 50 cents level during the week
  • May FCOJ futures fell 4.82% since the previous report to $1.1250 per pound after an almost 12% gain last week
  • June live cattle plunged 9.59% since last week
  • May feeder cattle tanked by 10.61% since March 27
  • June lean hog futures were an incredible 24.79% lower over the past week as the price of pork fell to a multiyear low
  • The June dollar index futures contract rose 2.17% on the week to 100.677 as volatile trading conditions continued.
  • June Long-Bond futures were trading at 182-09 up 1-16 for the week
  • The Dow Jones Industrial Average closes at 21,053 on Friday, April 3, down 584 points from March 27. The S&P 500 fell 2.08% since last week. The VIX was trading at around 46.80 on Friday down 18.74 on the week as volatility calms and price swings in stocks narrow in bear market conditions
  • Bitcoin was trading at $6,768.51 on Friday up $101.67 or 1.53% since March 27
  • Ethereum was trading at $142.75 on Friday, up 4.12% since the last report

 

Price Changes for the week:

DBC closes at $11.42 per share, up 48 cents since March 27

 Source: Barchart

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $1.09 billion and trades an average daily volume of 1,870,671 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume rose slightly over the past week and net assets remained steady as the price of the ETF posted a gain.

Please stay safe and healthy during these unprecedented times.

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal.  This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.