Energy: Oil prices jumped significantly yesterday after the release of the US stock data. Brent reached almost the mark of $50 a barrel and closed at the highest since the beginning of June. The same is true for WTI at a good $47 per barrel. The US Department of Energy reported a strong downturn on the whole line for the last week. Crude oil inventories fell by 4.7 million barrels, gasoline inventories by 4.4 million barrels and distillates by 2.1 million barrels.
This exceeded expectations, even for oil products. On the other hand, the API had reported a crude oil storage on the previous day. The reduction in the excess supply in the USA is thus progressing. The crude oil inventories are now at the previous year’s level
And not much more than in the first quarter. However, the deviation from the 5-year average is still 25%. The significant reduction in the number of gasoline and distillates resulted in a high crude oil processing and experts expect a further reduction of stocks in the coming weeks. The oil price is likely to rise above the $50 mark. At the same time, crude oil production in the USA and Libya is continuing to grow. US production is 9.43 million barrels per day, now at its highest level in two years. US shale oil production is expected to increase for the eighth consecutive month in August (+112.5 thousand barrels per day) and 5.6 million barrels per day to reach a record level. Libya wants to increase production by 1.25 million barrels per day by the end of the year.
Precious Metals: Gold is trading at around USD 1,240 per metric ton in the run-up to the ECB’s meeting. In euro, gold costs €1,075 per fine.
The ECB should refrain, in its communiqué, from opting for a renewed increase in monthly borrowing. Draghi must, however, proceed with it. Otherwise, interest rate expectations and yields on government bonds will probably rise. This, in turn, would be negative for gold.
Switzerland also exported large quantities of gold in June, especially to Asia. However, trade statistics include some surprises. According to Swiss customs authorities, exports are the result of China and Hong Kong, whose buying rose sharply to a combined total of 92.5 tons, both in comparison with the previous year and the previous month. This is the highest value so far this year. On the other hand, exports to India in June were 60% below the May figure at 27.4 tons. The Swiss trading data is in contrast to that reported by the Indian Ministry of Finance Preliminary gold imports, which amounted to 72 tons in June.
On the other hand, exports to India in June were 60% below the May figure at 27.4 tons. The Swiss trading data is in contrast to that reported by the Indian Ministry of Finance Preliminary gold imports, which amounted to 72 tons in June.
The Indian gold traders sped up in the run-up to the July 1st VAT increase on above-average gold purchases. Apparently, India has imported a lot of gold from other countries due to this change.
Industrial Metals: Not only was the recent price rise of lead to a 3.5-month high of nearly 2,350 USD per ton strongly speculatively driven – the net long positions in both categories we observed were expanded for the last four consecutive weeks – but there was also a lot of speculative buying interest in Nickel.
After the speculative financial investors retreated from Nickel for five weeks, they were again betting on rising prices.
In our opinion, this has strongly contributed to a substantial increase to nearly 9,600 USD per ton. As the increase in nickel prices continued somewhat after the data cut-off date, net long positions are likely to be even higher. On the other hand,
we have seen net long positions for aluminum last week, which explains the interim price drop below USD 1,900 per ton.
Except for tin and aluminum, the speculative financial investors generally still strongly rely on rising metal prices. For lead, copper, nickel, and zinc, the net long positions are up to 45% above the average since the start of data series about three years ago. This entails the risk of a clear price correction if the speculative financial investors turn their backs on industrial metals.