Energy Futures Reverse Last Week's Losses, Gas Caps First Monthly Gains

Precious Metals Climb Slightly on Russia-Ukraine Tensions

Gold managed to climb after a three consecutive weeks of losses, the metal added 0.56% from the previous week. On Tuesday the yellow metal rose the most in two weeks as the tensions between Russia and Ukraine flared, fueling the gold demand as a safe haven. Bullion has advanced 7.3% this year to date amid unrests and violence in the Middle East and Eastern Europe. Also, the Europe’s leaders have talked about further sanctions against Russia and that could potentially push the gold price higher. Meanwhile, the data that the U.S. economy expanded even more than previously forecasted in the second quarter limited the precious metal’s gains. Gold was at $1287.4 an ounce at the Friday’s close.

Meanwhile, silver prices were little changed as they added 0.17% weekly. With this weekly advance the metal’s period of six consecutive losing weeks has ended. According to TD Securities, the interest in silver is clearly on the short side and people expect silver to trade weak going forward, as the fundamentals are very week. Silver traded at $19.492 an ounce at the end of the week.

If Platinum price gained just slightly (0.44%), then Palladium price reached the highest level in 13 years. According to Johnson Matthey Plc, which makes a third of the world’s catalytic converters, Palladium demand is expected to exceed mine output by the most ever. With the tensions between Russia and Ukraine, and with the sanctions against Russia there is a lot of concern about palladium’s supplies. Palladium closed at $909.55 an ounce on Friday, while Platinum traded at $1424.7 an ounce.

Industrial Metals Gain on Stronger-Than-Expected U.S. Housing Data

Aluminum rose 1.74% and what is more important, the metal posted longest-ever streak of monthly gains as better than expected U.S. growth numbers added to signs of increasing metals demand and shrinking inventories. However, primary aluminum production at Aluminum Corporation in China (Chalco) plummeted 19.7% to 1.63 million tonnes in the first half of the year. Also supporting economic news attracted traders to buy aluminum this week.

After posting great results in the week before Copper fell last week. On Thursday the metal dropped the most in four months as tensions between Ukraine and Russia escalated and Europe’s leaders warned Russia about further economic sanctions. However, Copper managed to reverse some of the previous losses on Friday and closed 1.26% lower compared to the previous week. At the mean time, Botswana stopped Congo copper, Africa’s biggest producer of the metal, shipments over Ebola fear.

Nickel and Zinc both climbed 0.24% in the last week. Nickel has been able to advance despite its constantly increasing inventories, as Stockpiles tracked by the LME added 25% this year to reach a record high at 324,466 metric tons. According to Goldman Sachs, Nickel’s surplus will decrease to 20,000 tons in 2014 from 150,000 tons in 2013 before fluctuating into a deficit of 210,000 tons in 2015. Meanwhile, Zinc closed at $2353.25 a metric ton.

Energy Futures Reverse Last Week’s Losses, Gas Caps First Monthly Gains

WTI oil and Brent Oil, Crude posted first weekly gains, after falling for five straight weeks, while Brent added 0.88% last week. At the beginning of the previous week WTI oil fluctuated near the seven-month low on increasing supplies. However, moving closer to the week’s end Crude started to climb amid positive U.S. durable goods data and consumer confidence. Also the U.S. economy’s growth exceeded economists forecasts in the second quarter of the year. With the U.S. economy growing the oil remained supported and was able to cap the weekly advance. According to WTRG Economics, the U.S. demand has improved and the situation in Ukraine is also driving the oil prices. Brent closed at $103.19 in the week from 25th-29th of August.

Natural gas caped first monthly gains since April. At the beginning of the week gas already started to climb on bets that stockpiles will expand at a faster than normal pace. Gas inventories most likely added 78 billion cubic feet two weeks ago, compared to the five-year average increase of 58 billion, according to the survey by Bloomberg. The prices were also pushed higher by above-normal weather expectations from Texas to the Northeast in the first week of September, according to MDA Weather Services.

Heating oil increased almost 1%, namely 0.91%. According to PJK International BV, combined inventories of diesel and heating oil in Europe’s oil-trading center, have reached their peak since March 2012. While Heating oil storage tanks at commercial storage in Germany are 37.7% full.

Coffee Continues to Advance While Soybeans Extend Their Decline

Wheat reversed its previous losses gaining 0.22% the past week, it closed at $5.635 a bushel on Friday. Moreover, on Thursday the commodity traded close to the three week high at $5.7175, on worries that supplies from the Black Sea region will be disrupted as tensions between Russia and Ukraine escalated. It is worth mentioning that during the last month Wheat price has climbed almost 7%, which is a significant boost compared to the previous months. According to the International Grains Council, global wheat production will exceed last months estimates as expectations improved for crops in China, Russia and also European Union.

At the mean time, Corn continued its decline, with a drop of 1.82% this week. Also, the grain product has retreated 1.82% in the monthly time frame, as it has posted two consecutive weeks of losses. According to the government’s Crop Estimates Committee, South African domestic production is poised to be the largest since 1981.

Soybeans extended its losses to three straight weeks, as the commodity’s price slid 1.7% last week. Soybeans price decreased to the lowest level since September 2010 in Chicago on bets that farmers will harvest a record crop in the U.S., the world’s biggest producer. According to The Linn Group, Soybean yields are growing with the rains during the past week.

Coffee futures jumped outstanding 7.39% last week, closing at $2.012 a pound, as the inventories are decreasing. Moreover, a extended drought in Brazil has already taken about half of Jose Francisco Pereira’s coffee corp and it is set for the first three-year output decline since 1965. It is expected that the next year could be even worse.

EXPLANATIONS

Commodities

• Gold - COMEX active contracted (USD/t o.z.)

• Silver - COMEX active contract (USD/t o.z.)

• Platinum - New York Mercantile Exchange active contract (USD/t o.z.)

• Palladium - New York Mercantile Exchange active contract (USD/t o.z.)

• Aluminum - Active contract of primary aluminum of minimum 99.2% purity at the LME (USD/MT)

• Copper - Active contact of electrolytic copper at the LME (USD/MT)

• Zinc - Active contract of zinc od minimum 99.995% purity at the LME (USD/MT)

• Nickel - Active contract of nickel of 99.8% purity at the LME (USD/MT)

• Crude oil - light, sweet crude oil active contract on the New York Mercantile Exchange (USD/bbl.)

• Brent oil - Brent oil active contract on the ICE Futures Europe (USD/bbl.)

• Natural Gas - natural gas active contract on the New York Mercantile Exchange (USD/MMBtu)

• Heating oil - heating oil active contract on the New York Mercantile Exchange (USD/gal.)

• Wheat - wheat active contract on the Chicago Board of Trade (cents/bu)

• Corn - corn active contract on the Chicago Board of Trade (cents/bu)

• Coffee - benchmark Arabica coffee active contract on the NYB-ICE Futures Exchange

• Soybeans - active contract on the Chicago Board of Trade (cents/bu)

Indices

• S&P GSCI Precious Metals Total Return Index - commodity group subindex composed of gold and silver; the index reflects return on underlying commodity futures price movement

• S&P GSCI Industrial Metals Total Return Index - commodity group subindex composed of futures contracts on aluminium, copper, lead, nickel and zinc

• S&P GSCI Energy Total Return Index - commodity group subindex composed of futures contracts on crude oil, Brent oil, RBOB gas, heating oil, gas oil and natural gas

• S&P GSCI Agriculture Total Return Index - commodity group subindex composed of futures contracts on wheat, red wheat, corn, soybeans, cotton, sugar, coffee and cocoa

Indicators

• Long-term price forecasts-aggregated price forecasts based on predictions of 20 international banks forecasts

• USDA Wasde Total Estimated Inventories (Today)-current level of inventories of wheat in 1000 MT, corn in 1000 MT, soybeans in million bushels and green coffee in 1000 bags