Stocks Move Higher Ahead Of Joe Biden’s Inauguration

Traders Remain Optimistic As Biden Takes Office

S&P 500 futures are gaining ground in premarket trading as traders prepare for the first term of the new U.S. President Joe Biden.

Biden is expected to sign many executive orders in the first days of his presidency, reversing some of Donald Trump’s policies and boosting response to the coronavirus pandemic.

The market clearly provides Biden with the benefit of the doubt and expects that the new President will be able to provide additional support to the U.S. economy.

Market’s main focus is the new $1.9 trillion stimulus plan which should boost consumer spending at a time when Retail Sales have started to show weakness under the pressure from the second wave of the virus. If Biden succeeds in delivering the new stimulus package in the upcoming weeks, stocks will have an opportunity to gain strong upside momentum.

Janet Yellen Urged Lawmakers To “Act Big”

Yesterday, Janet Yellen stated that U.S. lawmakers should “act big” on the new coronavirus aid package to provide support to the economy.

She argued that the benefits of additional stimulus outweighed the risks of higher debt levels. Yellen’s dovish stance may serve as an additional upside catalyst for the markets.

Interestingly, foreign exchange market traders have not made up their minds on the impact of the new stimulus package, and the U.S. dollar was volatile but lacked direction in recent days. Meanwhile, stock traders are clearly optimistic about Yellen’s future policies.

Oil Moves Towards Multi-Month Highs

WTI oil is currently trying to get to the test of the recent highs at $53.90 as traders bet that the new round of stimulus will boost demand for oil.

Oil-related stocks had a strong trading session on Tuesday and look set to continue their upside move as investors put more money into the sector due to rising oil prices.

Oil traders have managed to ignore all negative developments on the coronavirus front and focused on the long-term picture. The current market mood remains bullish, and WTI oil has a good chance to get above recent highs and move towards the $55 level.

For a look at all of today’s economic events, check out our economic calendar.

Commodity Market Wrap-Up: WTI Crude Breaches $50 for First Time in 11 Months

Domestic and international crude oil benchmarks rallied late in the session on Monday, reversing earlier losses on reports that Saudi Arabia will make voluntary cuts to its oil output in February and March. Natural gas futures extended yesterday’s gains after the latest forecasts projected weather-driven demand. Gold up but steady ahead of Georgia election results.

Oil Prices Jump 4% on OPEC+ Output Talks

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures climbed more than 4% on Tuesday as OPEC+ was nearing a compromise to hold crude production steady in February.

During talks with the Organization of the Petroleum Exporting Countries and others including Russia, Saudi Arabia offered to make voluntary cuts to its oil production in February, two OPEC+ sources said.

Saudi Arabia said it would unilaterally cut 1 million barrels a day of its current crude production next month, a surprise move that comes after it agreed earlier in the day with other big producers to keep their collective output flat.

Saudi Arabia and Russia reached a compromise on oil policy among the world’s biggest producers, agreeing to maintain output levels through February and delay any increase until March, according to officials familiar with negotiations.

The producer group was setting aside a possible output increase on fears that the market could be flooded with crude if new coronavirus lockdowns further depress demand, four OPEC+ sources told Reuters on Tuesday.

An OPEC document dated January 4 showed the group was studying a range of scenarios including more production, no change or cutting output by 500,000 barrels per day (bpd) in February.

The bullish news sent U.S. prices above $50 for the first time since February.

Natural Gas Futures Extend Gains on Fresh Demand Forecasts

February natural gas futures continued to build on Monday’s gains, while moving closer to its December 22 top at $2.775, a potential breakout point.

The American Global Forecast System (GFS) model added 12 heating degree days (HDD) overnight, while the European model picked up 3-4 HDD by trending slightly colder for the January 16-19 time frame, according to NatGasWeather.

Meanwhile, in the six- to 10-day period, covering Sunday through January 14, Maxar made colder adjustments to its latest forecast for the Midwest and South.

Gold Futures Reach Two-Month High

February gold futures popped to a two-month high early Tuesday, underpinned by growing concerns about COVID-19 and the possibility of new restrictions and lockdowns that could slow the global economic recovery. Some traders were also reacting to the weaker dollar and the possibility it could drop even further if the Democrats win special U.S. Senate run-offs in Georgia.

For a look at all of today’s economic events, check out our economic calendar.

Weekly Commodities Recap: Firm Greenback Weighs on Demand for Dollar-Denominated Gold, Crude Oil

There was notable activity in the commodities markets during the holiday-shortened week. Gold prices finished marginally lower after touching a six-week high on Monday as the U.S. Dollar firmed. Crude oil closed slightly lower and inside the previous week’s range as traders began to question whether the seven week rally was running out of steam, and natural gas retraced about 50% of its two week rally on renewed weather concerns.

Gold Prices

Gold climbed to a six-week high last Monday, driven by news that U.S. congressional leaders reached agreement on a COVID-19 aid package, while lockdowns in the United Kingdom soured appetite for riskier assets and added to the precious metal’s support.

Last week, February Comex gold settled at $1883.20, down $5.70 or -0.30%.

Later that day gold erased early gains to fall by as much as 1.3% and spent the rest of the week trying to regain its upside momentum, under pressure from an advancing dollar as fears of a new coronavirus strain roiled markets and forced tougher restrictions.

Risk-off sentiment played a role in the weakness with Forex and equities participating in the price slide. The new variant of the virus sparked renewed uncertainty and instead of choosing gold as a safe-haven, investors sought protection in the U.S. Dollar, which weighed on foreign demand for dollar-denominated gold.

Crude Oil Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil also fell in similar fashion as gold with the common factor between the two commodities being the firmer U.S. Dollar.

Crude oil prices tumbled nearly 3% last Monday as a fast-spreading new coronavirus strain that has shut down much of Britain and led to tighter restrictions in Europe sparked worries about a slower recovery in fuel demand.

Last week, February WTI crude oil settled at $48.23, down 1.01 or -2.05% and February Brent crude oil finished at $51.29, down $0.97 or -1.89%.

Based on the price action the rest of the week, Monday’s sell-off represented a knee-jerk reaction to the virus news rather than the start of a change in trend. This assessment became more evident on Wednesday when oil prices rose more than 2%, boosted by draws in U.S. inventories of crude, gasoline and distillates that lifted investors’ hopes for some return in fuel demand.

Natural Gas Prices

The holiday-shortened trading week was not kind to the natural gas market as prices plunged on weak cash prices, forecasts calling for milder temperatures and light heating demand according to the U.S. government’s weekly storage report.

Last week, February natural gas futures settled at $2.512, down 0.169 or -6.30%.

Prices dropped sharply on Wednesday after the Energy Information Administration’s (EIA) reported a withdrawal coming in several Bcf below what the market had been expecting. The EIA said that inventories fell 152 Bcf for the week-ending December 18, while analysts had pegged the draw closer to 160 Bcf.

For a look at all of today’s economic events, check out our economic calendar.

World’s Largest Oil Company Aramco Shows Dire State of Sector

The latter results stand in stark contrast to the ongoing OPEC+ optimism that markets are recovering slightly. The Saudi giant, still valued at around $2 trillion, is fighting an uphill battle due to an ongoing market crash and slump in demand due to the pandemic. For Q4 and the H1 2021 it can be even expected to show even lower results, as oil prices are in flux, showing increased negative sentiment in the market and the still unclear negative repercussions of the re-introduction of lockdowns in major markets in the OECD. A possible US presidential election victory of Democrat contestant Joe Biden could even worsen the market situation as some expect a re-emergence of Iranian oil and gas to the market.

Aramco indicated also that the company’s figures have been slightly improved due to changes in royalties to the government. Some losses have been partly offset by a decrease in crude oil production royalties resulting from lower prices and volumes sold. At the same time, Aramco has benefitted from a decrease in in the royalty rate to 15% from 20%, lower income taxes and zakat. The oil giant also shows an increase in revenues due to higher gas product sales. Overall hydrocarbon production for Q3 is set at 12.4 million barrels of oil equivalent per day, of which crude oil made up 9.2 million bpd.

The overall financials also improved due to lower capital expenditures, now reported to be $6.4 billion. For the whole year, Aramco indicated that total capex for 2020 is expected to be at the lower end of the $25 billion to $30 billion range for 2020. The latter is still above the average in the sector, but shows that even the Saudi low cost producer is having a hard time to keep up its overall capex, possible resulting a further delays of new projects or some even being put totally on ice. It will be very interesting to keep an eye on Aramco’s investments and operations in the Red Sea region, and its flagship Ras Al Khair Shipyard project.

Aramco CEO Amin Nasser keeps up a positive mood, as he stated that “we saw early signs of a recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets.” Aramco also seems to take an aggressive position in contrast to its IOC competitors, as it keeps total dividend payments at the historical levels.

Nasser stated “we maintained our commitment to shareholder value by declaring a dividend of $18.75 billion for the third quarter.” The latter however needs to be reassessed, as it seems that the Aramco dividend position is becoming critical, as the company’s free cash flow is $12.4 billion in the third quarter, falling short of its dividend commitment. The current dividend position is however based on Aramco’s IPO statement that it will issue $75 billion in dividend annually for five years.

With a global oil and gas market being shattered by COVID, growing economic instability and a possible widespread recession knocking on the doors in OPEC+’s main markets, optimism is at present too high. No fundamentals are showing that growth predictions of the global economy are even going to be as expected, while demand is again being battered in OECD and other markets. The green shoots that emerged during the Summer and Q3 are now being cut by force.

Low prices and possible new oil glut scenarios should be assessed but it seems this strategy is officially not on the table of OPEC+ main producers. Weaker refining margins seems to be continuing, as air traffic and even road traffic will be hit again very soon. First signs are already in the market, as VLCCs and other maritime offshore storage options are again heating up as demand is growing.

Aramco’s internal messages are also partly diffuse. Optimism being shown by Aramco’s CEO Nasser and Saudi officials at OPEC stand in contrast to warnings being given by Aramco Trading’s VP Ibrahim Al Buainain, who stated the last days that OPEC+ will have to contend with a “lot of demand issues” before raising supply in January 2021.

A possible implementation of a new more flexible OPEC+ production volumes strategy could bring the market straight away into a glut situation. If OPEC+ decides to lower its production cuts by 2 million in January, more oil is going to be on the market, without clients. January 2021 could also be more critical if Libya’s production is increasing further, Iran is becoming more active and other smaller OPEC producers are opening up their taps. Al Buainain warned already for continuing lower margins, as demand for products is lower.

Q4 could be a watershed, if Aramco and its counterparts are not looking more at real facts on the grounds. Chinese demand is going to show most probably no real changes, as Beijing is keeping a low cost oil buying spree in play. The latter however is not able to be kept for a long-time in place, while demand in OECD will be down again, also resulting in lower demand for Chinese products.

NOCs like Aramco will have to cope with pressure of their own governments, which need higher revenues to counter deficits, but at same time have to be able to stabilize the market. At present, the two issues are constraining each other. OPEC+ is a major market force, but it is not able to reform or shape the buyers=market situation at present. It is also worrying to see low-cost producers such as Aramco feeling the heat at present. IOCs, not known for their cheap oil production are being squeezed like hell the coming months. In the long-run IOCs, such as Shell, BP, Total or Chevron, will suffer from all sides.

Tanker Sector Rollercoaster Looking at Scrapping to Bring Long-Term Profits

Fledgling demand will have a major impact on total volumes needed, while global oil and petrochemical production is expected to increase slightly.

The current roller-coaster situation in oil, gas and commodities in general, is putting pressure on the maritime sectors overall. Shipbroker Gibson stated last week that based on IEA’s long-term energy outlook and OPEC’s Oil Market reports “the analysis shows that in absence of large changes in current policies, it is still too early to expect a rapid decline in oil demand”.

In the IEA STEPS scenario, global oil demand grows by around 5 million bpd in 2021, reaching pre-pandemic levels by 2023. Consumption is also expected to increase steadily, even at a more subdued rate, 0.7 million bpd per year until 2030, reaching 0.1 million bpd by 2040. As reported by the IEA, in STEPS, US tight oil is expected to return to 2019 levels by 2022.

At the same time, demand for oil products (petrochemicals, fuels), more than 6 million bpd is coming online until 2025, while demand for products is expected to increase only by around 2 million bpd. The latter will put increased pressure on OECD refineries, as margins will be low, but MENA refineries are going to be hitting higher returns.

Looking at the above picture, tanker demand is looking at a brighter future. Continuing global demand is clear, production will follow but distances between consumers and producers will increase. Most commodity transport at present and in future will be maritime based. If the markets are hitting contango again, as some expect looking at COVID 2.0 and global economic crisis scenarios, short-term demand for tankers will increase even faster due to need for additional storage, not only crude but also products.

Some analysts are worried about the current situation, as tanker rates are very low. The latter partly is caused by the situation that the immense floating storage volumes that accumulated between 2019 and now, are only slowly being unloaded. After a short price hike in April-June when Saudi Arabia pushed additional volumes in the market, contrary to the fledgling demand, rates hit around $250,000 per day.

Analysts have hoped the last months that global demand would return to pre-COVID levels soon, emptying tankers fast and putting them back on the spot-market. The latter would lead to a more normal market situation.

However, COVID 2.0, increasing lockdowns in major markets, such as OECD and India, are pushing back unloading volumes, keeping tankers full and prices very low. For the coming months this situation seems to be continuing, or even up to H2 2021, barring a major geopolitical confrontation or a solution to Corona.

The current situation is very painful for tankers, as intelligence company Kpler stated to the press. Clarksons Platou Securities stated in the media that cratering crude-tanker rates are now well below both breakeven levels. The latter reported that rates for very large crude carriers (VLCCs, tankers that carry 2 million barrels of crude oil) averaged $17,000 per day, in stark contrast to levels of $100,000 per day at this time 2019. Looking beyond last year’s anomaly, current VLCC rates are less than a third of their 2015-19 average.

Kpler, collecting data on laden crude- and condensate-tanker capacity for ships stationary for 12 or more days, stated that global crude floating storage peaked at 190 million barrels on July 1 and had fallen 31% (or 29.5 VLCC-equivalents) to 131 million barrels as of last weeks. Even that there is a draw, reality is that storage volumes have been hovering around the 130-million-barrel level since late August. Chinese storage has fallen. But non-Chinese storage has risen from around 60 million barrels in late August to 80 million barrels currently.

The most important development here is that Chinese floating storage accounted for around half of global floating storage in the beginning of September. It’s now down to around a third. More worrying at present is also the percentage of unladen (empty) crude/condensate tankers versus the total fleet, based on deadweight tonnage, regardless of size category.

According to Kpler the situation is very ugly. There are too many empty ships chasing too few cargoes. And it’s getting worse. As reported by Kpler the laden/unladen mix was roughly evenly split at the beginning of the year, until the Saudi production decision. That caused a surge in crude-tanker rates in March and April. That rate spike, and ships being chartered for floating storage, brought the unladen percentage down to 40%-42% in May.

Since that time, the unloaded percentage has however increased to 52.5%, a year high. The latter also gives a very bearish signal to oil markets, as demand is not positive until at least end 2021. Still, there are also positive signs in the market. Not only could OPEC+ decide again to push volumes in the market, tipping the latter again to full contango.

At the same time, the tanker market is not static at all. Analysts should be looking at the underlying structure of the crude tanker market. The current orderbook for tankers is almost empty, enticing owners to consider scrapping older ones. In a normal market around 5% of tankers is being scrapped every year. Scrapping is expected to come back with a bang, as COVID had temporarily restricted scrapping operations also. The latter, combined with low rates as present will be a major force to revamp the sector. A possible additional jump in scrapping is to be expected when the older VLCCs, currently all used for floating storage, are being unloaded.

The latter was also supported by Hisham Alnughaimish, VP Operations Bahri Oil, Saudi Arabia’s main shipping company and a panel at the Saudi Maritime Congress webinar. The panel members said that the lack of tanker newbuilding orders, coupled with reduced freight and asset values over the past few months, will lead to a more positive market in 2021.

Current orderbooks for new builds are lagging behind as financing by traditional shipping banks have disappeared or was reduced. Alnughaimish reiterated that the current negative market fundamentals will result in lack of newbuilds and a bullish market for tankers in the coming years. The Bahri VP reiterated that around 25% of the world’s approximately 800 VLCCs are over 15 years old, and they can only command low rates. Alnughaimish expects that “if tanker rates remain depressed, all the aging ships will need to exit the market. Only then will we see a slow recovery but much better tanker demand-supply market by 2023”.

For investors and financial institutions oil tanker operations are a very cyclical sector. At present the market has reached its lowest level, without any doubt rates and orders will increase again. A post-COVID situation will not only entail a re-emergence of economic growth, higher demand for oil and gas products and commodities. At the same time, a re-emerging global economic growth also will show a different energy trade flow, as some hydrocarbon producing regions will become less prominent.

A re-emerging OPEC+ oil production will not only change tanker routes and storage demand but also effect tanker rates and margins. New IMO, Green Deal and other environmental requirements also will block a vast part of existing tanker fleet, pushing for refurbishments or new builds. For investors it is now very necessary to re-assess their portfolio and future investment partners based on changing trade volumes, routes and regulations. Investing in an old-cheap fleet could become not profitable but a liability. New builds and oil tanker companies or projects linked to producers (NOCs) could also become a major focal point for new investments.

Oil Market Optimism to be Hit by Q2 Financials IOCs?

The American Petroleum Institute (API) report yesterday evening a 6.83 million-barrels draw in crude oil inventories for the week ending July 24, in stark contrast to market expectations of a 450, 000-barrel rise. The verdict however is still out, as today more definitive US stocks data is due for release by the Energy Information Administration (EIA), the oil advisory of the US Department of Energy. Financials are again supporting the mantra that they see crude oil prices paring gains with continued growth concerns capping further upsides at current levels.

Still, as IG market strategist Pan Jingyi stated, “the surprise draw in crude oil inventories according to the API report had played a part in supporting prices overnight, though WTI can be seen staying relatively more cautious with a buildup in official EIA crude inventory expected on Wednesday”. Axicorp’s chief global analyst Stephen Innes is even more optimistic, expecting that “the enormity of the inventory draw should be sufficient to hold the bears at bay and temporarily alleviate some concerns about ongoing demand distress”.

Still, even that bulls are making headlines, the bears are just quietly waiting for their chance to surprise. The latter is based on the growing concerns about COVID-19 2nd waves in major consumer markets, not only in USA, but increasingly in the EU and UK markets. An unexpected growth is being reported of Corona infections, leading to a long list of regions in the OECD being put on Orange (only necessary travel) or even in lockdown again. Asian countries, especially India and Japan are also looking at the abyss.

For the demand of oil, the current re-emergence of lockdowns and renewed travel restrictions will have a direct impact on pure speculative optimism of demand growth. The summer season, known to be the US driving season with high transport fuel demand, is also in Europe a major market. Lower tourism, especially by plane or cars, will put demand levels back to way below average. At the same time, tourism spending in Mediterranean countries or France and Germany will be hit, putting current fragile economic growth (from Corona-levels) at risk of already on ice.

By looking at the surprise positive figures reported by China and some minor other countries can not or shouldn’t deflect attention for a possible 2nd wave of Corona and a still looming unemployment wave of unknown proportions. Demand is currently artificially pushed up by stimulus packages, while financial facts on the ground are extremely black. The long list of lay-offs in Europe and bankruptcies is staggering. In the coming months, most national stimulus packages in Europe will end, some literally after the summer season. A possible Indian summer scenario for economic figures is clearly visible but people seem to be only charmed by the red and orange coloring.

The optimism about the widely published EU Corona Fund packages, set at EUR750 billion, is also based on shaky grounds. Not only is the implementation still an issue, as the European Parliament is now having the ball in its corner, but possible recipients (Italy, Spain, Greece) have not even yet a strategy proposal how to use the available funding. The current situation looks to be a hot air balloon, that without structural economic changes in the Southern European Area no funds are going to be disbursed at all.

Still, oil producers, such as OPEC or US shale producers, are seeing light at the end of the tunnel. Reports are tumbling over each other showing demand increases to continue, and a supply-demand crisis appearing. Increased production by OPEC and others however more likely will result in a renewed oil glut in the market for H2 2020. Officially, global crude output is set to increase next month as OPEC+ sticks with its schedule of tapering coordinated production cuts from 9.7 million b/d to 7.7 million b/d from August 1.

The next couple of the oil market could be in a shock again. Norway’s Equinor will report second-quarter earnings on Friday, with Austria’s OMV, Italy’s Eni, France’s Total and Anglo-Dutch company Shell set to report next week. The U.K.’s BP will unveil their quarterly results on August 4. US oils also will report. ConocoPhillips will report earnings on July 30, with Exxon Mobil and Chevron expected to follow on July 31.

The current oil market’s positive vibes will most probably be crushed and mangled by historically red financial figures. The reaction could be violent if realism gets back to the market. The world’s largest oil, Saudi Aramco, is expected to also report its financials on August 9. No relief however is even to be expected from the King of Oil, as Aramco’s revenues and profit margins are also hit very hard.

If no miracle happens, the oil market is in for a negative run for the next 5-6 months. If US shale and OPEC+ compliance is also lowered, aka production increases, more oil will be hitting the market than financial analysts and hedge-funds are taking into account. Supply-demand is not yet in an equilibrium, while external indicators are negative. IOC financial reporting the next days will give an indication of the last couple of months, but should also be assessed as a pre-cursor for more pain. If big oil fails to be showing positive figures, leading to investment cuts, smaller ones, even oil producing countries, could be hitting a rock very soon. Lower oil prices due to increased production is not what the future needs.

Oil Price Fundamental Daily Forecast – Bearish Factors Piling Up Ahead of API Inventories Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil are edging lower on Tuesday in a lackluster, pre-holiday trade. Traders seem to be trying to balance the recent improvements in the economy against the impact of rising coronavirus cases. Traders even showed little reaction to better-than-expected Chinese manufacturing data.

At 09:19 GMT, August WTI crude oil futures are trading $39.18, down $0.52 or -1.31% and September Brent crude oil is at $41.24, down $0.47 or -1.13%.

Later today, investors will get the opportunity to react to the American Petroleum Institute (API) Weekly Inventories report.  It is expected to show a small drawdown.

Prices could fall sharply lower if there is another inventory build because of the already existing oversupply concerns. Furthermore, investors are already worried that some U.S. firms may begin ramping up production by the end of July.

A surge in coronavirus cases is also a growing concern because of its potential negative impact on fuel demand. Earlier today, U.S. Federal Reserve Chair Jerome Powell warned that the outlook for the world’s biggest economy was “extraordinarily uncertain”. Meanwhile, California and Texas saw record rises in new infections on Monday while in Britain, a reinforced lockdown was imposed in the city of Leicester.

Oil Major Shell to Write Down Up to $22 Billion of Assets in Second Quarter

Just a couple of days after oil shale giant Chesapeake filed for bankruptcy, oil giant Royal Dutch Shell said on Tuesday it will write down the value of its assets by up to $22 billion in the second quarter, after revising down its long-term outlook for oil and gas prices.

It comes after the energy company announced in mid-April an ambition to reduce greenhouse gas emissions to net zero by 2050, CNBC reported.

Shell said in a statement to investors that it had reviewed a significant portion of its business given the impact of the coronavirus pandemic and the “ongoing challenging commodity price environment.”

Chesapeake Energy Files Bankruptcy

On Sunday, fracking giant Chesapeake Energy announced its bankruptcy filing. Chesapeake’s share price has fallen nearly 93% in 2020.

“While today is a challenging day, your leadership team and I are confident that this is the best path forward for Chesapeake, and that we will emerge from the Chapter 11 process as a stronger and more competitive company,” CEO Robert D. “Doug” Lawler said in a memo to employees.

Daily Forecast

Concerns of demand destruction, rising COVID-19 cases, simmering U.S.-China trade relations and record U.S. supply are all negative factors that could keep a lid on crude oil prices.

On Tuesday, traders are likely to take their cues from risk sentiment and the API inventories report at 20:30 GMT.

For a look at all of today’s economic events, check out our economic calendar.

Shell Impairments Support Bearish Market

In contrast to the current optimism in the MSM about oil prices, increased demand and a possible return of global economic growth, the Dutch IOC put a huge damper on the latter. As already stated before current optimism in the market is not based on fundamentals but mainly on a perceived optimism at institutional investors and banks. The current upsurge in oil prices is still unfounded, as now also Shell reiterates by taking an impairment of between $15-22 billion for 2020.

With a slew of bad figures, the IOC is in line with British oil major BP’s actions the last weeks. The impact of the COVID-19 pandemic and its disastrous effects on energy demand and economic growth is slowly becoming clear some parties. Big Oil has been hit severely in Q2 2020, more than analysts have agreed upon before. As Shell stated none of its business groups has been left unscathed.

Not only the results in Q2 2020 has been dramatic, the company, as also stated by BP and others, but COVID and the unexpected oil and gas demand destruction will also have a long-term effect on commodity prices. The market slowly starts to realize that not only crude oil and natural gas/LNG has been hit, downstream at the same time has been hit too. The total write-down of $15-22 billion is dramatic, but maybe it will not even be the full amount in the coming years.

As indicated before, oil prices are hit and will be depressed for the long term. For 2020 higher price ranges almost are out of reach, as the drop in demand for crude oil and gas is still large. Some green leaves have been shown in Asia and some European countries, but the latter is still very weak. Re-emergence of COVID hotspots in EU and Asia, combined with continuing dramatic developments in the USA, Latin-America and Africa, are no real basis for higher price settings.

At the same time, the current crude oil storage volumes are still at historic high levels, leaving no real room for a surge in prices, even if demand would increase substantially. In its update, Shell reiterated that all positive signs in the market are very fragile.

The Dutch major indicated that its own oil-product sales volumes are expected to be between 3.5 million to 4.5 million bpd in Q2 2020, which is a dramatic 3.1-2.1 million bpd drop from the same period last year.

Market analysts should however look not only at the overall production or delivery figures but at the company’s assessments of oil prices in the coming years. For 2020, Shell, as BP, is much less bullish than financial institutions such as Bank of America (BofA)or others. BofA’s Global Research team stated last week that it lifts its oil price forecast for this year and next as demand recovers from coronavirus-linked shutdowns, the OPEC+ output cut deal curtails supply, and producers slash capital expenditure.

The bank expected Brent crude oil averaging $43.70 per barrel in 2020, up from a previous estimate of $37. In 2021 and 2022, the bank forecasts average prices of $50 and $55 a barrel respectively. BofA also forecast that “a pattern of falling inventories across most regions should emerge as we move into H2 2020. This optimism is clearly out of reach with real fundamentals on the ground. Norwegian consultancy Rystad Energy, however, has warned that the downside risk in oil markets is still very much alive. In its report Shell stated that it expects a Brent oil price of $35 for 2020, reaching $40 per barrel in 2021, $50 2022 and 46$ in 2023. Even that the price expectations are based on long term 2020 real terms, even these figures look for 2020-2021 still a bit optimistic.

Taking into account Shell (and BP) reporting, the short-term looks bleak. At least 2020 in plain terms looks like a possible write-off. If optimism on share markets is also hit by reality, a new negative spiral could hit markets. When only looking at fundamentals, combined with increased economic and geopolitical unrest globally, there is no real justification for oil market optimism in 2020. The next 6 months will be very volatile. Optimism should instead be pointed towards 2021. The price upward potential for 2021 is clearly available.

Low investments upstream, combined with large-scale shutdowns and bankruptcies are prime factors to take into account. Even if demand stays subdued, the market could change from a demand-driven to a supply constraint market. An average crude oil price (Brent) of above $40 per barrel is wishful thinking in 2020. 2021 could be bullish, pushing the bears back into hibernation. When looking at share prices, 2020 is however already interesting, if you have a long-term view. Current PE levels are still reasonable, but will most probably become hot end of 2020 – beginning 2021.

Market Cycles : An Interview with Andrew Pancholi 

Can you tell us about how you initially became interested in the world of cycles?

As a student of economics I was introduced when the Kondratiev wave and the concept of 60 year cycles was brought up. I went on to discover other cycles and noticed that events were recurring at regular intervals. I looked at things like World War I taking place between 1914-1918 and going back 100 years and seeing the Battle of Waterloo (1815).

Many religious and philosophical texts allude to repetition in cycles, you can see it in both Hinduism and Christianity. A clear example is in the Bible, Ecclesiastes 1:9: “The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.”

As you look at every culture you can see that everybody follows cycles, either openly or discretely. People are not necessarily aware of them, but we have a birthday every year and of course we also have the four seasons of the year; the planting season of spring, growing season of summer, autumn harvest and then winter where everything resets for the next rotation.

When we look at markets we see similar patterns unfold in Elliott Wave, where we get the five waves up and three waves down and this really piqued my interest. Many people are familiar with the decennial cycle that was first written about in 1939 by Edgar Lawrence Smith, in his book Tides in the Affairs of Men. He basically identified that typically years ending in 5 were very bullish, years ending in 7 tended to have pullbacks, years ending in 0 and 1 tended to be bearish and that’s pretty much what we’ve been seeing.

Just as we look at the cycles from the 10 year cycle, we find that there’s a 100 year cycle – this is a fractal pattern of the 10 year cycle. 100 years on from the 1907 Rich Man’s Panic we saw the Global Financial Crisis of 2007/2008. If you were to go back to 1907 and back another 100 years, we can see the Embargo Act of 1807, which precipitated a huge crash. So basically we can see that these cycles are there and that’s really how I got into it – seeing that there is a degree of predictive capability, which is quite obvious, but few people choose to see or recognize it.

Can you describe the proprietary cycles analysis software that is used to generate the Market Timing Report?

As I continued the research of longer term cycles, it seemed obvious that there were some other smaller cycles at play. The more I looked into this, the more confusing it became so I stripped them down into different layers. The idea is that if you have a long term cycle and it coincides with a medium term cycle and also a short term or a daily cycle, then where all those three align is where we get big events coming together. So we programmed all these short term and medium term cycles in, gave them a weighting and created histograms. These histograms are predictive.

We can anticipate some of the monthly and weekly cycles several years into the future. This can be up to 10 years for some of the monthly cycles and certainly five years for the weekly cycles. This gives us an idea of where a market is likely to change trend, they are like momentum points or energy points. That was the purpose of developing the software because these calculations were far too complex to carry out by hand.

What role does seasonality and Commitments of Traders data play when combined with cycles analysis?

What we found was that we can generate tipping points in markets and 90% of the time we’d see a reversal. For me it was fairly obvious that as the market unfolded into the forthcoming time point there would be a reversal of trend. However, every now and then we saw an acceleration so we thought about how else we can get the odds on our side. What else can give us clues? Seasonality is a fairly obvious one. Most people will have heard sayings like sell in May and go away for the stock market or the Santa Claus rally.

Equally, gold has a very strong seasonal profile. In September it is generally very bullish. The more we look across different commodities, especially things that grow out of the ground we can see that they have very clear patterns because they are directly related to the seasonal growing patterns. Using seasonality helps us get the odds on our side.

Then, with the Commitment of Traders (CoT) data we can see what the smart money is doing and what the dumb money is doing. CoT data can often get to extremes, but we can be at those extremes for several weeks or even months. We know that the market is about to turn up or turn down, but we’re not sure when. The window can often be several weeks. This is where our histograms are incredibly powerful and very important because they can help accurately time things, certainly down to a week and often down to a day.

You studied extensively the work of WD Gann, Edward Dewey and Ralph Nelson Elliott. Who among these pioneers in cycles, economics and market analysis had the greatest influence on you?

Without any doubt, WD Gann is the man that has influenced me the most. Probably infuriatingly, because he writes in a very veiled way and doesn’t reveal things very clearly! You do have to be a bit of a detective. But equally it was clear that he was able to forecast future turning points as well as future price levels and he had a tremendous understanding of these things. Dewey’s work is phenomenal as too is Elliott’s, but I think Gann was probably the most important. While a lot of Gann’s life remains a mystery, it is clear that he had made the money that he had alleged to have made. He did have a wonderful mini airliner as well as a fantastic steamship yacht, that was crewed by several people. He had the trappings of a very wealthy man. His reports were very accurate. He certainly had something, I’m not sure if he had it all.

You assisted in cataloging the official WD Gann material. Can you share any interesting insights into the mysterious man that you may have discovered during the process?

Most people know that he was a meticulous curator of market material. He hand wrote and updated every single chart for every contract across a huge range of commodities and stocks. He was looking at sunspot cycles. We found a very rare chart on sunspot cycles that hasn’t gone into the public domain. There was a lot of information there on weather and clearly he would use weather forecasting to have a view on crops. Those were some of the more interesting things. He was a great student of the esoteric as well. He was involved in Freemasonry, although he was demitted from the lodge at one point.

“Andrew is prescient. I follow him.”

– Bradley Rotter, Venture Capitalist, Investor and Entrepreneur.

Which major events have you been able to accurately predict using advanced cycles analysis?

The China/India crisis is a recent example. I wrote about the polarization of America four years ago and again in the March edition of the Market Timing Report (MTR). I forecast the 2020 equity market top – we gave the date of the high in the February 2020 MTR. This was based on the 90 year cycle from 1929 and also the 180 year cycle from the 1837-42 crash and depression – this was the story of the Zero Hour book written along with Harry Dent. I was also talking about it all through the 2019 reports.

Numerous other accurate predictions include the gold market this year, the 2007/8 global financial crisis – an easy one based on the 100 year cycle from the 1907 Rich Man’s Panic – and the commodity bull runs of 2008 and 2010. The 2010 commodity bull run was 90 years on from the 1920 bull run, another 90 year cycle there. I forecast the end of the tech boom in 2000-2001, based on a 72 year cycle. A lot of the geopolitical predictions have been accurate, notably events involving Iran and South Korea. We are fortunate to have been able to create a system that does give a high degree of predictive capability.

You recently stated that we are at ‘the most critical financial time period of our generation, if not this century’ and that multiple cycles such as stock market cycles and virus cycles are now coming together. Do you think that the recent recovery in the stock market may be short lived?

I think it is the most critical time, because you very rarely see so many big different cycles coming together at the same time. Based on the previous 90 year cycles and their half cycles – which include the 45 year cycle that takes us straight back to the OPEC oil crisis in 1974, I do think we are going to get a further downturn. We’re certainly going to get a huge economic downturn. I think it’s only just starting.

The American markets have been boosted by fiscal policy but if we look at European and other markets they haven’t made anywhere near as big a recovery as those of the United States. I also believe that the way that America is intervening creates what’s called a ‘translation of the cycle’ – which moves the inevitable cycle further down the road. I do expect that we can see more to the downside. I also do think that there are going to be some curveballs in the form of global conflict coming up.

What is your outlook for gold?

I did have a significant turning point in April and we haven’t taken the April highs out yet. In the longer term I’m bullish on gold but in the shorter term I’m expecting a pullback. Our system is highlighting a significant turn point for the third week of July 2020 and within this frame we have daily cycles for the 22nd July. I am looking for a reversal then.

Can you take us deeper into your analysis of war cycles?

There are several cycles that are coming together over the next year or two. If we take the shorter term cycles, I’ve found that years ending in 1 typically tie up with conflicts. Let’s start out with 2001, which is a very clear anchor point. We’ve got 9/11 taking place on September the 11th 2001. If we head back 10 years before that to 1991, that’s when Operation Desert Storm was taking place in response to Saddam’s invasion of Kuwait in August 1990.

Go back to 1981 and there were various things going on, notably Britain had become involved in the Falklands Crisis, which was a significant international war. America had interventions going on. Go back to 1971 and again various things are taking place. American involvement in Vietnam escalates and we see various degrees of instability in the Middle East. Go back to 1961, and we see the Bay of Pigs and the heightening of the Cold War. Go back to 1951, and we see that America is involved in the Korean War. I’m just going to take it one more cycle back to 1941, the 7th of December 1941, which sees Pearl Harbour attacked by the Japanese – so you can see how this carries on.

What’s interesting is that the 60 year cycle which is the equivalent of the Kondratiev wave, is the interval between December 1941 and September 2001 – the only two times that America’s been attacked on its own soil. In between this 60 year cycle, we’ve got these increments of 10 years. As we started in 2001 let’s update this sequence. In 2011, Britain and America were involved in Libya and hunted down Gaddafi. So you can see how this ties up with the possibility of war coming in 2021.

We’ve seen an oil crisis and the price of oil collapsing earlier this year. Geopolitical tensions may escalate very shortly, over the next few months. We know that creating a war can stimulate economies and it can also divert attention away from domestic problems – and let’s face it, America has plenty of those at the moment. There is another cycle we haven’t talked about that I refer to as the Revolutionary Cycle, which is around about 82 to 84 years. 2021 will see an 82 year cycle from 1939, the outbreak of the Second World War. So I anticipate that there will be some significant conflict breaking out within the next few months to the next year and a half and I think this is going to be a game changer for the world economies.

You have talked about the 144 year cycle (1720 South Sea Bubble – 1864 Civil War Cotton boom – 2008 commodity boom). Is there any significance that 144 is a number in the Fibonacci sequence?

I’m sure there is some significance because I never say anything is coincidence any more – there is some co-incidence but not by randomness. More importantly, 144 is 8 cycles of 18 and 18 year cycles are very prevalent, they constitute a generational influence. If we go back 18 years from the outbreak of Covid-19, we find that we had SARS breaking out.

We also had 9/11 and everybody was living in fear and, of course, airline stocks were affected in both of these cases. In fact the virus cycles do follow 18 year cycles as well . 144 is 8 cycles of 18 – I’m sure there is some importance of the Fibonacci sequence there. In terms of the 144 year cycle from the South Sea Bubble to the commodity boom of the Civil War, they are linear, 144 years each time. 144 is also 12×12 so we can reference the Bible with the 12 tribes of Israel there as well. When Gann said he learned things from the Bible, I’m pretty sure this is something he was alluding to – because he only ever alluded – he never told us directly.

The importance of the 50% level was recognized by Gann in his work. In my own trading experience, it was often uncanny how price would reverse precisely at 50% retracement levels. Can you elaborate at all on the significance of this?

If only I knew why that happens – I certainly agree with you. It’s obviously a tipping point or a pivotal point. If we delve deeper into this, the 50% point is the distinction between as above so below in my opinion.

What books or study material that you can recommend for beginners?

As a board member of The Foundation for the Study of Cycles we’ve now made the archives available very cheaply online and there’s a lot of good information there. So as well as supporting the foundation as a non-profit 501(c)(3), all the back issues of the cycles magazine are now available online to read and study. They explain many of the different cycles, not just in financial markets but also in weather patterns, earthquakes and all sorts of phenomena.

Thank you very much Andrew for participating in this interview.

Visit Andrew Pancholi’s websites:

Markettimingreport.com A monthly publication that provides traders and investors with time windows of when markets are likely to reverse or change trend.

Andrewpancholi.com Andrew’s personal website.

Find Andrew on Twitter: @AndrewPancholi

By Dan Blystone, Scandinavian Capital Markets

Commodity Weekly: Crude Oil Frets Geopolitics, Sluggish Demand Bounce

The energy sector gave back some of their record monthly gains, industrial metals paused while precious metals rose on increased geopolitical concerns, a weaker dollar and lower bond yields.

Commodities trading was mixed during the final week of May. A month that turned out to be the come-back month for many markets following the Covid-19 related collapse seen during Q1. The continued easing of lockdowns around the world have, despite dismal economic data, raised hopes that a V-shaped recovery may occur over the coming months.

This is optimism we unfortunately do not share – with millions of workers unlikely to return to work, together with the risk of the virus re-emerging as some economies attempt to open-up too soon.

The Bloomberg Commodity Index traded lower, with the energy sector giving back some of their record gains seen after the April collapse. Industrial metals also traded softer on rising US-China tensions despite the National People’s Congress introducing new stimulus measures. A challenge to precious metals was quickly reversed with both gold and not least silver continuing to attract demand amid a weaker dollar, lower real yields and friction between the world’s two biggest economies.

Bloomberg ci sector

While silver continued to claw back some of its substantial March losses, gold’s resilience was tested once again this past week. The lack of follow-through momentum from the recent breakout to $1765 had left the market nervous and it culminated when the spot price briefly broke below $1700/oz this past week. However, just like the break to the upside failed to attract fresh buying, the break below support was not met by fresh selling.

Instead, support was quickly reestablished as the dollar and bond yields moved lower on increased US-China tensions. Investors continue to view the yellow metal, and recently also silver, as the go-to metals for protection.

While hedge funds, which often trade on the back of a short-term technical price developments, have been rather quiet in recent months, the demand for ETF’s backed by bullion has continued to go from strength to strength. Global holdings in gold-backed ETF’s have risen non-stop for the past six months with assets at a record level above 3,100 tons.

The same goes for silver which, despite its March slump, has seen total holdings rise strongly to reach fresh records on an almost daily basis during the past couple of months.

Having rallied by 50% since that March low at $11.65/oz, the metal has also managed to claw back some ground against gold. The gold-silver ratio, which expresses the value of one ounce of gold in ounces of silver, has recovered from the record 125 level reached in March to the current 98, still well above the five-year average close to 80.

We maintain our bullish outlook for both metals, not least gold now that its premium to silver has narrowed. The main reasons why we cannot rule out reaching a fresh record high over the coming years are:

Gold acts as a hedge against Central Bank monetization of the financial markets
Unprecedented government stimulus and political need for higher inflation to support debt levels.

The inevitable introduction of yield controls in the US forcing real yields lower
A rising global savings glut at a time of negative real interest rates and unsustainably high stock market valuation. Raised geo-political tensions as the Covid-19 blame game begins Rising inflation and a weaker US dollar.

The crude oil rally that emerged following the sub-zero collapse on April 20 is showing the first signs of pausing. This after the WTI futures contract hit $35 resistance and Brent failed to challenge $37.2/b, both levels being the 38.2% retracement of the January to April sell-off. The brief collapse into negative territory last month on the expiring May WTI contract probably was the single biggest contributor to support the strong rally that followed.

The event on April 20 sent a shockwave through the global oil market with producers realizing that something dramatic had to be done in order to rescue the market from even more pain. This probably led to the very strong and rapid compliance that major producers have been exhibiting during May.

In their latest monthly Oil Market Report the International Energy Agency saw global supply drop by 12 million barrels/day in May to reach a nine-year low at 88 million. Demand meanwhile was expected to recover from being down 22 million barrels/day year-on-year in May to down 13 million in June.

Supporting the process has been the rapid and in most cases involuntary reduction in US shale oil production, now estimated by the IEA to reach 2.8 million barrels/day year-on-year in 2020. Previous production cuts by OPEC+ always attracted some level of hesitancy as members of the group risked yielding further market share to producers in North America. That risk evaporated with the slump in WTI as it left many producers out of pocket, thereby forcing them to halt production.

Having potentially reached the consolidation phase, it is worth considering what could trigger renewed weakness. There are several risks with the most relevant being:

Easing lockdowns sparking a resurgence of Covid-19 outbreaks. Whether OPEC+ can maintain the current high level of compliance. Cash strapped US producers desperate to increase production with WTI back above $30/b.
Post-pandemic changes in global consumer habits (less flying and more working from home). A break above $35/b on the July WTI futures contract could signal a potential extension towards $40/b while support should emerge at $30/b. Only a break below $28/b would raise concerns of a deeper correction.

Apart from the risk of a new trade war between the US and China, as well as a weaker-than-expected demand recovery, the oil market focus in early June will once again turn to Vienna where OPEC and the OPEC+ group convene to discuss a path forward. Some concerns that Russia may struggle to commit to current cuts beyond July may once again create some nervousness prior to the June 8 to 10 meetings. This on the grounds that the recovery in crude oil prices so far has primarily been driven by supply cuts, that can easily be reversed, and not yet a solid recovery in demand.Crude Brent Oil

HG crude oil increasingly, just like crude oil, looks like it needs a period of consolidation. Having almost retraced most of its Covid-19 related sell-off in March, the metal is likely to struggle in its attempt to break back above $2.50/lb, a level which provided support but now resistance, since 2017. The National People’s Congress in China, which has just finished, offered fresh stimulus measures that will increase demand for raw materials in key sectors such as construction and transport.

Overall, however, it was not the fiscal bazooka the market has seen during previous downturns. While perhaps stabilizing the outlook it is unlikely to drive a recovery in growth back to the 6% level. For now, traders are holding onto the prospects for a global economic rebound outweighing increased tensions between the US and China.

Corn, a recent favorite short-sell among hedge funds, was heading for its biggest weekly gain since last October. The recent recovery in crude oil has led to increased demand from ethanol producers who normally consumer close to 40% of the US corn production.

Together with the potential short-term threat of hot and dry weather across the US Midwest, the price has moved higher and it now looks like a floor has been established at the key $3/bushel level. Speculators held a net-short of 245,000 lots (31 million tons) in the week to May 19 and continued short-covering could see the contract challenge an area of resistance above $3.40/bushel. Wheat is also finding a weather-related bid while soybeans remain troubled by US-China tensions hurting the prospect for Chinese demand.

crude oil Covid-19 related rollercoaster has gone full circle. After rallying by 25% during March on worries supply from South America would be disrupted the price has since collapse once again.

The prolonged shutdowns around the world have since reduced demand for quality beans from coffee shops and cafés. This week the price broke support and dropped back below $1/lb and well below the current cost of production for many farmers across South America. Something that may get addressed when the International Coffee Organization hold a virtual meeting of its International Coffee Council from June 1.

For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

US Open – Waking From a Stimulus Induced Dream – Oil, Gold and BTC in Focus

The Addiction Needs Feeding

Federal Reserve Chairman, Jerome Powell’s, comments were hardly comforting on Wednesday. A bleak assessment of the outlook combined with demands for more fiscal stimulus – at a time when Congress looks deeply divided on the issue – and a rejection of negative rates wasn’t exactly what investors wanted to hear right now.

Of course, there’s already unprecedented amounts of stimulus flowing around the financial system in a bid to avert a global depression but we are already in a severe recession. Any hope of a V shaped recovery is long gone and we’re in full damage limitation mode. Perhaps the reality is finally setting in, although who would be surprised to see equities marching higher again tomorrow?

It’s long been said that markets are hooked on stimulus, only more of the drug can sustain them. If that was true before then it’s certainly looking the case now and even the staggering efforts we’ve seen in recent months may not be enough. Only more will do.

No sign of nerves ahead of June expiry

Oil prices are on the rise again this morning following a mixed day on Wednesday. A surprise drawdown in inventories was quickly offset by Powell’s comments but they didn’t hold oil back for long. Up around 5% already today as it continues to slowly grind higher. There’s no sign of nervousness going into Tuesday’s June expiry, although it’s worth noting that the carnage only started a day before last month. Either traders have short memories or we’re going to avoid a repeat of last month. I wouldn’t bet against either.

Gold testing range

Gold saw plenty of activity on Wednesday around Powell’s appearance and even managed to cling onto some of those gains despite his insistence that negative rates is not something they’re considering. I often get confused as to why markets get so hung up on specific policy moves when there’s so many other tools available that are far more effective. Still, it’s a relief to see the yellow metal moving again, a break above last week’s peak around $1,722 could be very encouraging for gold bulls.

Bitcoin threatening bullish $10,000 breakout

Bitcoin has found a new lease of life and is pushing $10,000 again as it looks to capitalise on the halving hype and take it back into five figure territory and keep it in the headlines. It’s run into resistance once again this morning but I don’t think the fight will end there. A break of $10,000 would be very bullish for the cryptocurrency and we’ve all seen what that can lead to. The previous peak around $10,500 may provide some resistance above but the next real test will be $11,000, although I wouldn’t be confident of that holding for very long.

For a look at all of today’s economic events, check out our economic calendar.

This article was written by Craig Erlam Senior Currency Analyst at OANDA.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

WTI Crude Spikes into Close Following Bullish Bloomberg Report on OPEC Production Cut Expectations

U.S. West Texas Intermediate crude oil futures jumped more than 8% in a surprise move just ahead of the end of the regular trading session

Traders said the catalyst behind the surge in prices was a report from Bloomberg that the oil minister of Algeria said OPEC and its allies, known as OPEC+, was discussing a massive cut that could reach 10 million barrels per day.

Oil Fund Trading Halted

The excessive volatility fueled by the bombshell news forced regulators to shut down the United States Oil Fund (USO), which tracks the price of oil. The halt in trading was necessary due to wild activity into the end of the session. The ETF resumed trading shortly after the initial halt.

US Crude and Fuel Stocks Soar as Demand Craters Due to Pandemic

U.S. crude oil stockpiles spiked higher while fuel demand slumped last week, each by their most ever, government data showed on Wednesday, as the U.S. oil industry felt the full brunt of efforts to stem the spread of the coronavirus pandemic.

Crude stocks soared by 15.2 million barrels in the week to April 3, their biggest-one week rise. Most of those inventories were sent to the key Cushing, Oklahoma, futures storage hub, where stocks rose by 6.4 million barrels last week, the U.S. Energy Information Administration (EIA) said, also the most in one week ever.

U.S. gasoline stocks rose by 10.5 million barrels in the week, also exceeding expectations and falling just shy of an all-time record. Gasoline product supplied in the most recent week slumped by 24% to 5.1 million bpd.

Demand Sinks

Crude and Fuel prices have sunk this year as the coronavirus pandemic has sapped global fuel demand, virtually shutting down commercial aviation worldwide and cutting off gasoline demand as people stay home and businesses remain shuttered.

On Wednesday, the EIA said U.S. fuel demand dropped by about one-third in the last three weeks, with last week’s fall of 3.4 million barrels per day the most ever.

Daily Production Drops

Crude output has already to drop as well, with daily production plunging 600,000 barrels per day to 12.4 million bpd, in its biggest decline since July 2019, the EIA said.

Refineries severely cut activity the week-ending April 3, with crude runs falling 1.3 million bpd. Refinery utilization rates tumbled 6.7 percentage points to drop to just 75.6% capacity use.

Italy’s Economy Proves Extremely Vulnerable to Coronavirus Epidemic

Governments around the world are in a quandary over Covid-19: how to counter the economic disruption caused by the outbreak when public-health measures to contain the disease require often severe restrictions on people’s ability to travel and work.

Italy has reported the largest number of cases of coronavirus in Europe, standing at more than 9,100 now, with at least 463 deaths to date, leading the government to take drastic measures to slow the spread of the disease. Schools closed on 5 March for a minimum 10 days and sporting matches will be played behind closed doors for the next month, if they haven’t already been cancelled. The authorities have expanded a quarantine to all of Italy, restricting public gatherings and encouraging “social distancing”.

The public health challenge the Italian government faces is very serious. But on top of the disruption to millions of ordinary people’s lives and the distress for those worst affected, the Italian economy is experiencing a triple shock.

Export Sector Risks

First, Italy’s export-oriented industry is relatively heavily exposed to the disruption to global supply chains caused by the initial outbreak of the disease in China. As Europe’s most-important manufacturing powerhouse after Germany, Italy is the EU’s third biggest exporter of goods to China and third biggest importer from China after Germany and France.

The particularly virulent outbreak of the disease in Italy is taking place in the country’s northern industrial heartland. The region of Lombardy alone counts for around 27% of exports and 22% of Italy’s GDP, with the total share of the economy attributed to severely impacted regions rising to 40% once Veneto and Emilia-Romagna are included.

Significant Impact on Tourism Industry

Secondly, the impact on Italy’s treasured tourism sector is significant. The international spread of the virus is discouraging visitors to some of Europe’s most popular holiday destinations such as Milan, Venice and Florence. Tourism accounts for 13% of Italy’s economic output by itself. Even after the global and Italian manufacturing sectors start to recover, Italy’s tourism exports might well lag behind should travellers remain reluctant about voyaging too far from home.

Vulnerable Economy and Public Finances

Thirdly, the Italian economy and public finances were already in a vulnerable position in comparison with those of other European countries even before the coronavirus struck. GDP shrank in the fourth quarter. Public debt remains high. We expect gradually rising debt to GDP in the future. In addition, we undertook an exercise a month ago to stress test the public finances of EU countries. Italy scored weakly in terms of its fiscal vulnerability to a severe economic shock and capacity to weather such a crisis without significant increases in public debt.

Conclusion

Our conclusion is that Italy is facing a very difficult year as the epidemic has brought widespread disruption to many communities in addition to the distress they are suffering as the death toll has mounted. We estimate that the economy may shrink in 2020 by at least 0.3%; we had previously forecasted growth of 0.25%. The sometimes-shaky coalition government of Prime Minister Giuseppe Conte has limited room for fiscal manoeuvre to offset the economic shock absent endangering debt sustainability.

The government has opened up its fiscal first-aid kit amid the public health emergency to help businesses, workers and those on the front-line dealing with the health crisis. Measures include doubling a “shock therapy” fiscal stimulus package to EUR 7.5bn (0.4% of GDP) on 5 March, including tax credits for companies hardest hit, bolstering a national wage-supplement fund and extra cash for health services and the civil protection and security forces. There are now discussions about further raising the size of the stimulus.

Weaker-than-expected growth and extra-governmental spending suggest that Italy’s budget deficit will widen significantly this year, if only temporarily, after narrowing to 1.6% of GDP last year. The government recently estimated a deficit of 2.5% of GDP in 2020.

In normal times, that would put Rome at loggerheads with Brussels as Italy has repeatedly brushed up against EU fiscal limits. However, this time is different: in recognition of the gravity of the situation in Italy and in the rest of Europe, the European Commission has indicated maximum flexibility around its fiscal rules in 2020 if spending is clearly linked to the epidemic mitigation. Still, Rome’s approach needs to recognise the government’s budgetary constraints and still-elevated public debt of 135% of GDP at end-2019, second highest in the EU after Greece’s.

There are concerns that public debt may rise towards 140% of GDP in coming years, which could adversely impact on investor confidence particularly as a pronounced slowdown in global growth now appears definite this year. After all, an economic downturn can increase debt via multiple channels.

One is by curtailing tax revenue flows and raising counter-cyclical spending by governments, both driving budget balances downwards. Another is the reduction in nominal economic output, raising debt-to-GDP ratios via a denominator effect. Yet another is the possibility that the cost of servicing the debt rises as investors lose faith in governments with greater fiscal vulnerabilities.

One metric of investor concerns is the widening in the spread in yields between Italian and benchmark 10-year German government bonds to around 200 basis points, up from 130bps in mid-February. The last thing Italy needs presently is any deeper market sell-off and financial instability.

Even so, we recognise that Italy has significant institutional and financial strengths, among them a large and diversified economy, a long record of primary fiscal surpluses and moderate levels of non-financial private sector debt. Moreover, the government’s success in raising revenues supported the lower-than-anticipated budget deficit in 2019, which has given Rome greater leeway to release funds in responding to the crisis.

Crucially, Italy is a main beneficiary of the euro area’s ultra-accommodative monetary policy and lender-of-last-resort facilities. Italy can borrow over 10 years at very low rates still of just over 1%. Indeed, the BBB+ sovereign ratings we assign to Italy – itself 1-2 notches above the assessment from US credit rating agencies – reflects our unchanged view of Italy’s systemic importance within the euro area and associated likelihood of receiving multilateral support in worst-case scenarios.

Dennis Shen is a Director in Public Finance at Scope Ratings GmbH.

Oil Price Fundamental Daily Forecast – Traders Not Impressed With New China Stimulus; Await EIA Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed on Thursday, shortly before the regular session opening and the release of a weekly government inventories report. Earlier in the session, both futures contracts hit one-month highs, but the rallies stalled after testing technical resistance levels.

Three factors contributed to today’s earlier strength and Wednesday’s price surge. They were fresh stimulus from China, a drop in new coronavirus cases at the epicenter of the outbreak and supply concerns in Venezuela and Libya.

At 11:19 GMT, April WTI crude oil is trading $53.57, up $0.08 or +0.15% and April Brent crude oil is at $58.96, down $0.16 or -0.27%.

Gains may have been capped by another surge in U.S. crude oil inventories after a private industry forecast showed an unexpected weekly build.

China Cuts Benchmark Lending Rate

China’s more to cut its benchmark lending rate on Thursday helped ease worries about slowing demand in the world’s second-biggest oil consumer and largest crude oil importer. The move came as no surprise since it was already priced into the market. Earlier in the week, China’s central bank made moves that set up today’s rate cut.

Furthermore, the reaction may have been muted because it takes time for the change to circulate through the economy. Secondly, the number of factories open for business is still low so it’s difficult to see demand stabilizing at this time.

New Coronavirus Deaths Hit Three Week Low

China reported 349 new confirmed cases in Hubei province on Wednesday, the lowest in more than three weeks, while the death toll rose by 108, down from 132 the previous day.

Although this indicator is important, there are those skeptics who believe we still don’t know enough about the virus to call it contained. Some believe it could be in hibernation, waiting to reemerge when people go back to work.

Supply Concerns Reemerge

On Wednesday the U.S. sanctioned a trading unit of Russian oil giant Rosneft for its ties with Venezuela’s state-run PDVSA, a move which could choke the OPEC member’s crude exports even further.

At the same time, conflict in Libya that has led to a blockade of its ports and oilfields shows no signs of a resolution.

Cutting supply is nearly always bullish for crude oil prices. In this case, I think the moves are underpinning prices rather than driving them higher. The main driver of the price action in my opinion remains speculation that OPEC and its allies will cut production further when they meet in March. The reaction in the market could come sooner if Russia says it will go along with the plan.

American Petroleum Institute Weekly Inventories Report

The API reported late Wednesday that crude oil inventories rose unexpectedly by 4.16-million barrels during the week-ending February 14, compared to analyst expectations of a 2.494-million barrel build in inventory.

The API also reported a draw of 2.67 million barrels of gasoline for the week-ending February 14. Analysts were looking for a 435,000-barrel build for the week.

Distillate inventories were down by 2.63 million barrels for the week, while Cushing inventories rose by 4.21 million barrels.

Daily Forecast

The U.S. Energy Information Administration (EIA) will release its weekly inventories report at 16:00 GMT on Thursday. It is expected to show a 3.3 million barrel build.

Based on the reaction to the API numbers, I don’t expect much of a reaction to the EIA data if there is a larger-than-expected build. However, if the EIA number meets expectations or comes in lower than estimated then look for prices to surge higher.

Energy Recap: OPEC Leaves Traders Guessing, Setting Up Volatile Move on Friday

The energy markets were at the forefront on Thursday as OPEC’s two-day meeting in Vienna kicked off and the U.S. government released its natural gas weekly storage report. Crude oil prices whipsawed as traders reacted to reports of production cuts ranging from 400,000 to 500,000 barrels per day. Meanwhile, natural gas managed to eke out a small gain despite a smaller-than-expected draw down.

Crude Oil

Thursday’s two-sided price action was understandable since discussions included the size of the production cuts, the length of the new deal and compliance with the production policy.

On Thursday, January WTI crude oil settled at $58.43, unchanged. February Brent crude oil finished at $63.39, up $0.39 or +0.62%.

Background

The 14 OPEC members and 10 major producers make up a 24-country group known as OPEC+. Since the beginning of the year, they have pledged to cut output by 1.2 million barrels, with the current deal scheduled to run through March 2020.

Production cuts were first implemented in January 2017 in an attempt to stabilize prices and trim global inventories in response to the rapid rise in U.S. shale oil production.

Ahead of the Meeting

According to reports, Iraq was said to be pushing for a 400,000 barrel a day production cut on top of the existing agreement for cuts of 1.2 million barrels per day.

Additionally, Russian energy minister Alexander Novak said that OPEC+ was discussing a larger-than-expected 500,000 barrel a day production cut for the first quarter of 2020.

More Details Coming after Non-OPEC Producers Meeting on Friday

Reuters reported that oil producers led by Saudi Arabia and Russia reached a deal in principle on Thursday to cut output by an extra 500,000 barrels a day in the first quarter of 2020 but stopped short of pledging action beyond March.

Details of the agreement and how the cuts will be distributed among producers still need to be ratified at a meeting in Vienna of OPEC and non-OPEC nations on Friday.

Natural Gas

The U.S. Energy Information Administration (EIA) reported Thursday that domestic supplies of natural gas fell by 19 billion cubic feet for the week-ended November 29. This was slightly below the 22 Bcf consensus estimate.

On Thursday, January natural gas settled at $2.427, up $0.028 or +1.17%.

Since the 19 Bcf pull was within the range of estimates, traders called the number “neutral”. Traders weren’t expecting much of a reaction to the number since it may have been skewed by last week’s Thanksgiving holiday.

The focus for traders now shifts to next week’s report that is expected to be much tighter. Traders are hoping the U.S. and European weather models start to offer some clarity after a week where the U.S. model showed cold and the European model trended warmer.

Heliogen Makes Major Breakthrough In Solar Technology

A Major Breakthrough For Renewable Energy And Climate Change

An under-the-radar startup funded by Bill Gates has just made a major break-through in solar power.  The break-through, using mirrors and AI to focus sunlight to a fine point creating temperatures in excess of 1000 degrees celsius.

To put that number into perspective think about this. The temperature of the Sun’s photosphere, the visible surface, is about 5,500 degrees celsius. The company, Heliogen, promises to disrupt the carbon-based energy market but it still has a long way to go.

Using mirrors to focus sunlight for industrial purposes is not a new thing. It is used in limited circumstances to produce heat and electricity. In Oman concentrated sunlight is used to power oil rigs. The major difference is the temperatures. Until now, concentrated sunlight has not been able to produce the temperatures required for wide-scale use of the technology by industry.

Fighting Climate Change With Technology

Industries like steel and cement use massive amounts of carbon-based fuels to produce the required temperatures their processes need. According to the U.S. EPA steel and cement-making are among the leading contributors to carbon-based pollution.

Between them, they are estimated to produce 7% to 10% of global emissions and that’s where the promise of Heliogen’s technology lay.  Massive amounts of clean, carbon-free, heat and the best part is that sunlight is free. Once a business invests in the technology it is virtually free to operate.

The Heliogen system operates with AI. The software tracks the angle of the sun and adjusts an array of mirrors to follow it. The mirrors, hundreds of them, focus the sunlight into a single spot.

The technology is so ingeniously simple the machine worked the very first time it was turned on. The challenge now is to package the tech in a way usable by industry.

Another hurdle faced by Heliogen is the fact the sun doesn’t always shine. This means Heliogen will have to develop systems to store excess energy until it is needed.

Disrupting The Market

Scalability is the key to Heliogen’s success. It is likely the company will be able to apply their tech to industry, it is unlikely Heliogen will be able to disrupt the broad energy market any time soon.

The goal, ultimately, is to be able to produce totally carbon-free hydrogen. Carbon-free hydrogen is a viable alternative energy source and virtually unlimited provided the technology can be developed.

Heliogen’s next step is convincing industry to use the technology. Companies already reliant on fossil fuels may balk at the investment needed to convert to the new system.

There is also a significant investment in land required, the system can take up several acres. Despite this, Heliogen’s CEO thinks it will be a no-brainer once businesses begin to understand they can get clean, carbon-free energy and save money at the same time.

Solar Stocks Face The Biggest Risk From Heliogen

Solar stocks face the biggest risk from Heliogen’s technology. To date, the bulk of solar generation is done via panels and they are far less efficient than Heliogen’s technology.

Further, the Heliogen system is more adaptable to large-scale power generation making it a better choice. With the EIA forecasting a 50% increase in solar capacity over the next five years there will be plenty of opportunities for Heliogen to prove itself.

The two companies most at risk are SunPower (SPWR) and First Solar (FSLR). These companies are the two largest and most successful solar panel manufacturers globally. Recent improvements in manufacturing are aiding profitability and point to positive EBITDA in 2020.

Also at risk are traditional electric utilities. The costs of operating a solar-farm fell below that of coal-fired plants for the first time this year marking a major turning point in the industry. The EIA says more than 60% of new electric generating capacity will be solar over the next year. The advent of Heliogen’s tech could easily accelerate that trend.

Companies like Alliant Energy (LNT) are making a big push into solar. Alliant has been building out its solar capacity for years and is a possible buyer of Heliogen technology. Likewise, solar yieldcos like Terraform Power will also be interested in the new technology because of the cost advantage.

Yieldcos operate in much the same way as an MLP in the midstream sector. They own and operate solar infrastructure and sell the energy to mainstream power operators. The benefit of the yeildco is the dividend. Terraform Power aims to return 80% or more of its earnings to shareholders.

Palladium: Completely Reverse The Rumors for a Bubble Burst

Markets feared for a possible bubble bust, with Commerzbank stating: “In our opinion, a correction of the palladium price was long overdue. It is not yet possible to say whether yesterday’s plunge was the bursting of a bubble; for this to be the case, the price would need to fall even more sharply or further.”

The correction was indeed posted, while since May the asset was ranging between 1235-1600 area. At the beginning of September however, we have seen a remarkable rise, above the 5-month range. Technically speaking, we can claim that the bubble didn’t burst, but conversely the correction and the long-term consolidation was a correction of the 4-year rally. The precious metal has retraced more than 31% of year losses. Meanwhile, it holds above the 20-week SMA and 50-week SMA, which has been providing a strong Support area for the asset the past four quarters.

Theoretically speaking, however, palladium is strongly positively correlated with the car industry as it finds 80% of its demand from gasoline auto cars. The source of palladium’s performance the last decade, though, was and still is the global supply deficit, fired by the car industry demand. Considering only the 2017 supply, the deficit reached 875K ounces, while in 2018 it was at 121K ounces. Meanwhile, this year the palladium market is expected to present a deficit of up to 809K ounces.

Despite the consolidation in Palladium’s prices, it is unlikely that the demand for palladium will change significantly the next few years. This could be explained by the tighter emission standards, as despite the overall economic slowdown, the auto sales slowdown in China (due to tax cuts) and US, the higher recycling volume, and the high price of palladium, car-makers must meet emission standards. Hence, they are quite “forced” to use palladium, as it is the metal used in catalyst converters to reduce emissions from gasoline engines.

In Europe on the other hand, the swing from diesel engines has hit European producers and as a consequence platinum price as well, which was the most preferable metal for reducing emissions in diesel engines. This balanced the risks stated above, for palladium’s price, as diesel engines are “undesirable”.

The expensive palladium and unwelcome platinum could eventually push manufacturers to turn to potential PGM-free engines (PGM stands for Platinum Group Metals). However, this would take time. A potential approach for manufacturers could be to substitute palladium for platinum on engines other than diesel ones. However, this is a scenario that has not been accomplished yet and seems unlikely to happen for now.

So far, the legislation and the taxation for diesel engines, but also the general tighter emission standards, have boosted the substitution of diesel engines into alternative engines, such as electric, hybrid and petrol which all require the use of more palladium. Gasoline vehicles are expected to maintain a majority market share to 2025 and to increase in absolute numbers including gasoline hybrids. These factors could keep palladium demand rising, unscathed from the economic slowdown and the higher recycling volume.

Meanwhile, in China, the world’s largest consumer, Morgan Stanley reported that new legislation will be applied from 2020 which will require 30% more PGMs on each vehicle. This is another factor that is likely to keep demand high, despite the already overextended palladium price at 1662.

As Norilsk Nickel Group, one of the largest palladium mining companies stated: “The demand for palladium is growing.” “Per unit PGM consumption in hybrid cars is higher than in traditional vehicles with the same ICE volume; accordingly, we expect palladium consumption to increase by 3 mln oz by 2025. “

Additionally, according to research from BASF, the world’s leading supplier of catalysts, demand for palladium in China is expected to grow from 2.332 million ounces to 3.429 million ounces by 2022.

As the supply deficit is more in favour of palladium than platinum or any other PGM metal, the palladium price is expected to extend its recent rally. Currently, palladium is accelerating higher, above 1,650. Having rejected the Resistance area at the upper line of 5-month range at 1609.85 on March 21any pullback could be considered once again as a correction.

Andria Pichidi, Market Analyst at HotForex

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Crude Called $5 to $10 Higher After Drones Attack Saudi Crude Facilities

Crude oil futures are expected to open $5 to $10 per barrel higher Sunday evening and gasoline about 12 to 25 cents per gallon higher after Saudi Arabia shut down half of its oil production after a series of drone strikes hit the world’s largest oil processing facility in an attack by Yemen’s Houthi rebels.

Brent crude futures settled last week at $60.25 per barrel, down 1.8% for the week, its first decrease in five weeks. U.S. West Texas Intermediate (WTI) crude futures finished the week at $54.85, for a 2.7% loss for the week, its first decrease in three weeks.

Latest Facts

CNBC is reporting that according to Saudi Aramco, the closure is expected to impact almost 5.7 million barrels of crude production a day, about 5% of the world’s daily oil production. A U.S. Energy Information Administration report in August showed that Saudi Arabia produced 9.85 million barrels per day.

Saudi Energy Minister Abdulaziz bin Salman said the attacks also led to a halt in gas production that will reduce the supply of ethane and natural gas liquids by 50%.

Saudi Aramco President and CEO Amin Nasser said nobody was hurt in the attacks and emergency crews have contained the fires and brought the situation under control.

“Work is underway to restore production and a progress update will be provided in around 48 hours,” Nasser said.

According to Reuters, Saudi Arabia has yet to comment on the extent of damage on its oil production but industry sources have said some 5-6 million barrels per day (bpd) or 5-6% of global supply have been affected.

Yemen Claims Responsibility

The Khurais oilfield operated by Saudi Aramco, the state-owned oil giant, and the Abqaiq oil processing facility were attacked by a number of drones on Saturday. Abqaiq is a major facility, crucial for global energy supplies. Yemen’s Houthi rebels are claiming responsibility for the attack.

“We promise the Saudi regime that our future operations will expand and be more painful as long as its aggression and siege continue,” a Houthi spokesman said. The attack deployed 10 drones, the Houthis said.

However, U.S. Blames Iran for Attacks

“Tehran is behind nearly 100 attacks on Saudi Arabia while Rouhani and Zarif pretend to engage in diplomacy,” Pompeo wrote on Twitter. “Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply. There is no evidence the attacks came from Yemen.”

US Offers Support for Saudi Arabia’s Defense

CNBC reported that the White House said President Donald Trump spoke with Crown Prince Mohammad bin Salman to offer U.S. support for Saudi Arabia’s defense.

“Violent actions against civilian areas and infrastructure vital to the global economy only deepen conflict and mistrust. The United States Government is monitoring the situation and remains committed to ensuring global oil markets are stable and well supplied,” the White House said.

Negative Week for Grain Prices Due to Weather and Optimism in Trade

Grains such as soybeans, corn, and wheat are trading with a negative note on Friday as investors are closing positions ahead of the weekend. Agricultural futures are ready to close the week with losses.

Soybean contracts down for the second day

ZS1 Soybean Futures 1-hour chart Sept 6
ZS1 Soybean Futures 1-hour chart Sept 6

Soybean is trading in consolidation mode after the deep decline performed on Thursday. Investors are trading in profit-taking mode ahead of the weekend.

On Thursday, soy was rejected by the 8.80 area, and it fell 1.60% to close at 8.61. On Friday, the grain attempted a recovery, but the dovish pressure was too intense, and it is now trading 0.12% down.

On the week, soybean is ready to close its third negative week in the last four, this time with a drop of 0.80% in the period. The unit has been trading in a range between 8.62 and 8.80 for a month.

Technical indicators are suggesting more room for the downside. However, the mentioned 8.62, and the 8.45 area are containing the unit.

Corn breaks below 3.56 and trades at near 4-month lows

ZC1 Corn Futures 1-hour chart Sept 6
ZC1 Corn Futures 1-hour chart Sept 6

Corn is trading negative on Friday after a brief period of consolidation on Thursday. However, the picture is really dovish and even more now that the pair broke below the 3.56 support and is trading at 3.55, its lowest level since May 13.

Currently, futures of corn are trading at 3.56, 0.63% negative on the day. Technical conditions remain bearish for the unit with the 3.50 and 3.40 areas as next support zones.

On the week, corn resumed its free-fall from 3.76 after the recovery performed the previous week. This time, corn contracts are falling 3.60% on the period. The technical picture is also very dovish.

Wheat stops two days of gains and falls on Friday

ZW1 Wheat 1-hour chart September 6
ZW1 Wheat 1-hour chart September 6

Wheat is trading down on Friday as investors are taking profits ahead of the weekend and after two days of gains. The grain is trading 0.75% down at 4.62, and it is heading to test the 4.60 area.

On the week, futures of wheat are fighting to close the period in positive, but the odds are against it as technical indicators are suggesting more declines before the end of the session. Wheat is trading 0.05% negative on the week.

Coffee on consolidation mode below 100.00

Futures of coffee has been trading in a small range between 95.00 and 98.00 during the whole week. Consequently, the unit is posting a weekly decline, but the drop is not that much. Coffee contracts have declined 1.50% in the week.

Gold and Silver Recover After Lower Than Expected NFP

Metals such as gold and silver were trading negative on Friday on a mix of improving market sentiment and a profit booking movement ahead of the weekend. However, both metals reacted positively to the weaker than expected nonfarm payrolls data that was published today.

The same story happened with palladium and platinum that are now in recovering positions. Copper is extending its already daily gain.

U.S. job market extends its weak note

The United States created 130K new jobs in August, below the 158K expected by market and the previous data of 159K. The last month was revised 5K down from 164K.

On the other hand, the wages growth rose 3.2% in August, above the 3.1% expected by the market. However, the number is a slowdown from July’s revised 3.3% data.

The unemployment rate remained at 3.7% another month, while the participation rate of the labor force rose to 63.2% in August from 63.0% in the previous month.

Gold recovers almost all it’s daily losses after NFP

XAUUSD 1-hour chart Gold September 6
XAUUSD 1-hour chart Gold September 6

Gold reacted positively after the weak nonfarm payrolls data in the U.S. and it is recovering almost all its daily losses.

Early in the day, the metal broke below the 1,520 area and fell to test the 1,500 critical level, but after the employment report, it jumped to be traded at 1,517. Currently, the unit is trading 0.16% negative on the day at 1,516.

On the week, the metal is ready to close its second negative week in a row as the unit has not been able to break above the 1,550 area. XAU/USD needs a run above the 1,527 to close positive on the period. Meanwhile, it is posting a 0.30% weekly decline.

Silver turns positive after NFP

XAGUSD 1-hour chart Silver September 6
XAGUSD 1-hour chart Silver September 6

Silver exploded after the nonfarm payrolls data on Friday and recovered all its previous daily losses to turn positive on the day at 18.65.

Previously in the day, silver was trading down amid improved risk sentiment and profit-taking ahead of the weekend. XAG/USD fell from the 18.60 area to trade at 18.00, its lowest level since August 27.

However, the U.S. employment report ignited the pair and sent it back to 18.70, where it is trading right now with a 0.35% daily gain.

On the week, silver is ready to close its fifth positive week in a row, thought the unit is trading well below weekly highs at 19.50.

Copper negative after testing the 2.6400

XCUUSD 1-hour chart Copper September 6
XCUUSD 1-hour chart Copper September 6

Copper is trading negative on Friday as investors are closing positions around the 2.6400 area before the weekend. After testing its highest price in over a month at 2.6420, XCU/USD is now 0.25% up on the day at 2.6180.

XCU/USD is ready to close its second positive week. The base metal is posting a 3.10% weekly gain right now. It would be its best week in over six months.