• Volatility in stocks- Economic data remains problematic
  • Precious metals move mostly lower
  • Crude oil makes a significant comeback as the energy commodity and products post gains
  • Sugar and lean hog prices post double-digit percentage gains with hogs up over 20% on the week
  • Digital currencies post gains


The story of this week:


Oil Equities Played Catchup With The Energy Commodity In April- The Figures Are A Bit Of A Mirage


The price action in the crude oil market was the most volatile in history in April 2020. The continuous futures contract on NYMEX traded in a range from negative $40.32 to $29.13 per barrel or an incredible $69.45. The active month June contract hit a low of $6.50 on April 20. The high for the month was on April 9 at $33.15, a range of $26.65.

Nearby Brent futures, the other leading benchmark in the crude oil market experienced a trading range of $16 to $36.43 or $20.43 per barrel. The global pandemic caused the demand for crude oil to grind to a halt. A lack of storage capacity pushed prices to all-time lows on NYMEX crude oil and the lowest level of this century in the Brent futures. At the end of April, both NYMEX WTI and Brent crude oil prices recovered.

On a month-on-month basis on the continuous futures contract on NYMEX was 6.3% lower, and Brent was close to unchanged. Meanwhile, shares of companies in the oil sector did something they had not done in quite some time; they outperformed the energy commodity.

Crude oil share had lagged both the stock market and the price action in crude oil throughout 2019 and early 2020. In April, they played catchup and posted a significant percentage gain.

Source: Barchart

As the chart shows the XLE, which holds a portfolio of the leading energy companies that trade in the US stock market, moved from $29.06 at the end of March to $38.00 per share on April 30, a recovery of 30.8% during a month when price carnage hit the oil patch. On April 20, the day that oil fell a negative price, the XLE was at a low of $31.78, higher than the March 31 low. On May 1, selling in the stock market sent the XLE lower even though crude oil posted a gain on the session.

The percentage gain in the oil ETF product is a mirage because of the performance last year and through March. Many of the companies in the XLE fell to the lowest share prices in decades in March. The percentage move to the upside masks the previous price destruction as the rally came from a very low level in the oil stocks. In March 2020, the XLE traded to its lowest value since 2003.

Meanwhile, oil shares were dropping while the price of crude oil was holding up in 2019 and earlier this year. The price action in the stocks turned out to be a harbinger of the price action we witnessed in April. Time will tell if the recovery in oil shares is a sign that higher prices are on the horizon for the price of the energy commodity. I continue to expect lots of volatility in the oil stocks and the price of the commodity over the coming weeks and months. Keep those stops tight and take profits when they are on the table in this sector. Volatility creates many trading opportunities, but it is a nightmare for investors that take a static instead of a dynamic approach to the market.


Highlights in commodities:

  • June gold falls 2.0% on the week, settling at $1700.90 per ounce
  • July silver declines 3.28% as the precious metal settled at $14.938 per ounce on May 1
  • July platinum moved just 0.01% higher on the week. July platinum was at a $927 per ounce discount to June gold futures, which narrowed since last week
  • June palladium fell 4.31% and settled at $1,887.80 per ounce. Rhodium fell $800 per ounce to a midpoint of $5,200 over the past week
  • July copper was 1.05% lower to the $2.3120 level since April 24
  • June iron ore futures moved 0.79% higher over the past week
  • The BDI fell 5.51% since April 24 to the 635 level
  • July Rotterdam coal fell 0.46% since last week
  • July lumber was 4.95% higher since April 24 and was at the $328.50 per 1,000 board feet level
  • June NYMEX crude oil recovered by 16.77% and closed the week at $19.78 per barrel
  • June Brent crude oil roll to July and rose 6.85% since last week
  • The premium for Brent over WTI in July closed Friday at the $4.23 level as the spread moved $0.34 higher since last week
  • June gasoline rose 9.46% while June heating oil futures posted an 8.64% gain over the past week
  • The gasoline crack spread in June was 1.98% lower since last week. June heating oil cracks moved 3.71% lower since April 24 as gasoline and heating oil underperformed crude oil
  • Natural gas declined by 0.26% on June futures closing the week at $1.890 per MMBtu. The EIA reported an injection of 70 bcf into storage on Thursday for the week ending on April 24
  • June ethanol rose 4.41% on the week
  • July soybeans moved 1.19% higher since last week
  • July corn was 1.39% lower on the week
  • CBOT July wheat was 2.64% lower since last week. July KCBT wheat trading at a 33.50 cents discount under July CBOT wheat as the discount moved towards historical norm by 13.75 cents per bushel since last week
  • July sugar rose 11.82% since April 24 and closed at 10.97 cents per pound
  • July coffee posted a 0.61% loss since last week
  • July cocoa rose 3.40% since April 24
  • July cotton rose 0.38% since last week as the fiber futures were at the 55.84 cents per pound level
  • July FCOJ futures rose 4.14% since the previous report to $1.1310 per pound
  • June live cattle moved 5.60% higher since last week
  • August feeder cattle rose 0.99% since April 24
  • June lean hog futures were 21.69% higher over the past week after an over 17% gain last week
  • The June dollar index futures contract fell 1.33% on the week to 99.100
  • June Long-Bond futures were trading at 181-04 down 0-28 for the week
  • The Dow Jones Industrial Average closes at 23,724 on Friday, May 1 down 51 points from April 24. The S&P 500 fell 0.21% since last week. The VIX was trading at around 37.11 on Friday up 1.18 on the week the stock market continues to be volatile
  • Bitcoin was trading at $8,777.24 on Friday up $1,217.51 or 16.11% since April 24
  • Ethereum was trading at $211.51 on Friday, up 11.34% since the last report


Price Changes for the week:


DBC closes at $10.76 per share, up 6 cents since April 17

 Source: Barchart

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $779.2 million, and trades an average daily volume of 1,814,169 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume fell over the past week and net assets were steady as the price of the ETF rose slightly.

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.