- Crude oil and natural gas prices tank
- Palladium rises to a new record high- Not much action in the other precious metals
- Agricultural commodities move mostly higher
- Bitcoin recovers
- New highs in the stock market, but some selling hits the market on Friday
The story of this week:
OPEC Next Up
The price of WTI and Brent crude oil futures on the NYMEX and Intercontinental futures exchanges were sitting near recent highs on Wednesday, before the Thanksgiving holiday in the United States. Nearby January NYMEX futures settled at $58.11 with the Brent futures at $64.06 per barrel. On the final session in November on Friday, the price of the energy commodity dropped like a stone turning technical indicators bearish.
As the daily chart of NYMEX January crude oil futures highlights, the oil declined to the $55 per barrel level. The first level of technical support stands at $54.85, the November 20 low. A move below that level would negate the short-term bullish price pattern that has been in place since early October. Price momentum and relative strength indicators turned lower with the price action on November 28, and daily historical volatility spiked to just under the 40% level. Open interest in the NYMEX crude oil market had been rising, reaching a high at 2.196 million contracts as of November 27. The metric climbed from 2.033 million since October 30. With the OPEC meeting next week, it is likely that new longs had come to the oil market given the bullish price trend, which the October 3 low at $50.69 per barrel. Last Friday, some of the market participants holding long risk positions in the oil market likely scrambled for the exits as the price dropped.
The December 5 and 6 OPEC meeting could be the reason why Brent futures outperformed WTI futures at the end of last week.
As the weekly chart of the price of January WTI minus January Brent futures shows, the premium for Brent rose to over $7 per barrel on November 29, the highest level since the mid-September drone attack on Saudi oilfields.
The market expects OPEC to extend the current 1.2 million barrel per day production cut through the first six months of 2020. However, with the price of Brent at the lower end of OPEC’s desired range at the end of last week, a further cut in production could be necessary to support the oil market. One of the reasons for the production cut was the cartel’s concerns over global demand as a result of the trade war between the US and China. The trade war escalated in early August, which was after the last OPEC meeting. The oil market will now wait to hear from the cartel on December 6 when it issues its statement and production policy for the first half of 2020. Russia will play a significant role in the decision as the Russian oil minister and his boss, Vladimir Putin, have had increasing influence since 2016. The rise of US production to its most recent new high at 12.9 million barrels per day as of November 22 means that the international oil cartel’s power has declined. We will find out next week if OPEC attempts to flex its muscles to influence the price of the energy commodity. The price action on Friday could turn out to be a significant factor when it comes to the cartel’s decision.
Highlights in commodities:
- December gold rises by only 0.14% and settled at $1465.60 per ounce
- December silver falls 0.18% on the week as the volatile precious metal settled at $16.969 per ounce
- Platinum posts a 0.60% gain on the week. January platinum was at a $567.60 per ounce discount to December gold futures, which narrowed since last week
- Palladium moved 4.14% higher for the week as it settled at over $1815 per ounce after reaching a new record high at $1828.90 during the week
- December copper fell 0.23% as the red metal sits at below the $2.65 level
- December iron ore futures moved 0.51% lower on the week
- The BDI bounced 16.89% higher since November 22 to the 1467 level after recent losses
- January Rotterdam coal moves 1.73% lower since last week
- January lumber moved 1.51% higher since November 22 to $416.60 per 1,000 board feet
- January NYMEX crude oil moved 4.50% lower since November 22 as selling hit the market on Friday
- January Brent crude oil moved 1.97% lower since the previous report as Brent outperformed NYMEX crude oil in the leadup to the OPEC meeting
- The premium for Brent over WTI in January closes Friday at the $7.00 level up $1.35 since last week
- January gasoline moved 4.98% lower while January heating oil futures fell 2.58% over the past week
- The gasoline crack spread in January was 3.35% lower while the January heating oil crack moved 1.81% to the upside since November 22 as products reflected seasonal factors
- Natural gas plunged 15.39% on January futures closing the week at $2.281 per MMBtu. The EIA reported the second withdrawal of the season of 28 bcf from storage on Wednesday for the week ending on November 22
- January ethanol moves 2.91% lower on the week on weakness in gasoline
- January soybeans fell 2.26% since last week
- March corn rose 0.79% on the week
- CBOT March wheat rose 4.64% since last week. March KCBT wheat trading at a 94.75 cents discount under March CBOT wheat. The discount moved away from the historical norm since last week
- March sugar rose 0.86% since November 22
- March coffee posted a 2.94% gain on the week
- March cocoa declined 1.87% since November 22
- March cotton moved 0.79% higher since last week
- January FCOJ futures rose 0.46% since the previous report
- February live cattle rose 1.90% since last week
- January feeder cattle were 2.30% higher since November 22
- February lean hog futures moved 0.89% higher over the past week
- The December dollar index futures contract rose only 0.03% on the week
- March Long-Bond futures trading at 159-04 up 0-03 for the week
- The Dow Jones Industrial Average closes at 28,051 on Friday, November 29, up 175 points from November 22. The S&P 500 rose by 0.99% since last week. The VIX was up only 0.28 on the week and was trading at around 12.62 on Friday as stocks back off new highs from during the week
- Bitcoin was trading at $7,764.38 on Friday up $395.92 or 5.37% since November 22.
- Ethereum was trading at $155.60 on Friday, up 1.15% since the last report
Price Changes for the week:
DBC closes at $15.31 per share, down 30 cents since November 22
DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $1.37 billion and trades an average daily volume of 1,022,809 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 slightly over the past week while the price of the ETF was posted a loss.
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.