Breaking News
0

Energy & Precious Metals – Weekly Review and Calendar Ahead

CommoditiesJul 14, 2019 05:42AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

By Barani Krishnan

Investing.com – An unimaginable bullish cocktail for crude, and what did we get in the end? A 5% gain on the week that not many analysts are confident will be retained through next week.

Oil had some of its best supportive factors this week: A storm that cut by more than half oil production in the Gulf Coast of Mexico; Iran’s tit-for-tat attempts to seize a British tanker; an unexpectedly large drawdown in U.S. crude stockpiles; OPEC mulling indefinite output cuts as U.S. shale becomes a permanent threat and Federal Reserve Chair Jerome Powell making his strongest case yet for a rate cut.

Yet, just as the week was drawing to a close, the International Energy Agency – the perma-nemesis of oil bulls – was ready with the proverbial bucket of cold water to douse any heated rally. The IEA’s “main message”: the world had lived through a supply surplus of nearly 1 million barrels per day in the first six months of 2019 despite aggressive OPEC cuts, and the market is setting itself up for a second half glut too as U.S. shale supply is not expected to let up.

“The usual result that I see in a bull run are lot of bulls,” said Scott Shelton, energy futures broker at ICAP in Durham, N.C. “This one feels different.”

“It feels like the market is not a believer of this rally,” he added.

It could be a better week ahead for gold.

Gold longs share Powell’s feeling for a rate cut more than many may think. After a knee-jerk drop early on Friday following even a stronger-than-expected reading for producer price inflation, both bullion and futures of gold advanced on bets for a Fed easing in the next three weeks.

Energy Review

West Texas Intermediate crude ended the week up nearly 5% while U.K. Brent oil booked an almost 4% gain.

The rally was underpinned by the outsize U.S. crude inventory drawdown of 9.5 million barrels in the week to July 5, versus forecasts for a draw of 3.08 million barrels.

Oil prices were also supported by Tropical Storm Barry’s targeting of the Louisiana coast and production and refining platforms on the Gulf of Mexico – half which had to close, cutting more than 1 million bpd in output.

Bulls also got a lending hand from Powell who all but confirmed to Congress a rate cut when the Fed meets July 30-31.

In Friday’ session, both WTI and Brent started the U.S. session on a somewhat wobbly footing after the IEA predicted the return of an oversupplied market next year despite OPEC’s production cuts being in full gusto.

Just a day earlier, the Organization of the Petroleum Exporting Countries estimated in its July report that it will be producing about 560,000 bpd more than needed by next year, no thanks to the continued surge in U.S. shale oil output.

The report suggested that the Saudi-led OPEC and its key non-member ally Russia, might be cutting production indefinitely beyond its currently set deadline of March 2020.

Energy Calendar Ahead

Tuesday, July 16

American Petroleum Institute weekly report on oil stockpiles.

Wednesday, July 17

EIA weekly report on oil stockpiles.

Thursday, July 18

EIA weekly natural gas report

IEA monthly report

Friday, July 19

Baker Hughes weekly rig count.

Precious Metals Review

For the week, both bullion and Gold futures prices remain about 1% off highs hit earlier in the week on the back of Fed Chair Powell's congressional testimony.

Gold prices moved forcefully into $1,400 territory on Wednesday after Powell’s remarks on business and economic conditions in his testimony to Congress raised gold bulls’ conviction that a rate cut of at least 25 basis points was almost a certainty at the forthcoming July 30-31 Fed meeting.

Powell has been under tremendous pressure from U.S. President Donald Trump to authorize a rate cut soon, with the president indicating he will even fire him if he doesn’t. The Fed chief has maintained that he will not be politically cowed or resign even if Trump demands for it.

Investors have rushed into gold over the past two months, pushing the yellow metal from $1,200 levels to $1,400, as talk of a rate cut that will weaken the dollar and boost gold came into play. The Dollar Index, which pits gold against a basket of currencies, has surprisingly yielded little since Powell began his dovish trip, hitting just one-week lows.

Data on Friday showed that headline inflation at factory gates rose 1.7% from a year earlier in June, topping expectations for a larger drop to 1.6%. The core annualized reading of the data that removes volatile food and energy components unexpectedly held steady at 2.3%.

The readings follow a similar picture painted Thursday by core consumer prices that also unexpectedly ticked higher in June.

Gold prices, which benefit from decreasing interest rates that lower the opportunity cost of holding non-yielding bullion have seen a bumpy ride this week as Powell’s apparent commitment to policy easing sent the precious metal soaring 1.15 percent.

Although these stronger-than-expected inflation readings are not likely to be considered a game changer for the Fed, they do call into question Powell’s concerns that weak inflation could be more persistent than originally expected.

Precious Metals Calendar Ahead

Monday, July 15

NY Empire State Manufacturing Index (Jul)

Tuesday, July 16

German ZEW Economic Sentiment (Jul)

Trade Balance (May)

FOMC Member Bostic Speaks

U.S. Core Retail Sales (Jun)

U.S. Import Price Index (YoY)

U.S. Retail Sales (Jun)

Industrial Production (Jun)

Manufacturing Production (Jun)

Business Inventories (May)

NAHB Housing Market Index (Jul)

Wednesday, July 17

EU Core CPI (Jun)

U.S. Building Permits (Jun)

U.S. Housing Starts (Jun)

U.S. Housing Starts (Jun)

Thursday, July 18

U.S. Continuing Jobless Claims

U.S. Initial Jobless Claims

U.S. Jobless Claims 4-Week Avg.

U.S. Philadelphia Fed Manufacturing Index (Jul)

U.S. Philly Fed Business Conditions (Jul)

FOMC Member Bostic Speaks

Japan National CPI (Jun)

Friday, July 19

German PPI (Jun)

German WPI (Jun)

Energy & Precious Metals – Weekly Review and Calendar Ahead
 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments
Hank Williams
Hank Williams Jul 14, 2019 11:11PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Refiners shutting down in Europe due to margins. per Bloomberg.
Hank Williams
Hank Williams Jul 14, 2019 12:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Look for gasoline shortages with refiners down in North East and Louisiana.
Hank Williams
Hank Williams Jul 14, 2019 11:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Regardless how analysts feel about oil, it's market has always been controlled by traders and hedge funds. It has never been about actual physical inventory. It moves a lot on perceptions. The long term trend is down and that is easy to see. Are inventory numbers actually so high now to justify a the reduction under $75 for WTI? Inventories have never mattered and shouldn't. Price should have been based on proven reserves and the cost to get to end user. But that hasn't been the case over the last forty to fifty years has it?
Barani Krishnan
Barani Krishnan Jul 14, 2019 11:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
No, it hasn't, Hank, and you're absolutely right!
Tar Jay
Tar Jay Jul 14, 2019 11:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Excellent points.
Christian Busse
Christian Busse Jul 14, 2019 10:35AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Can you show me the correlation between gold and interest rates over the last 50 years ?
Barani Krishnan
Barani Krishnan Jul 14, 2019 10:35AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This might help ... https://www.sunshineprofits.com/gold-silver/dictionary/gold-real-interest-rates/
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email