Oil Prices Remain Supported Amid Supply Concerns
Oil prices remained strong last week, despite a slight correction on Friday driven by a stronger dollar and robust U.S. economic data, which sparked concerns about prolonged high interest rates from the Federal Reserve. Falling crude inventories and renewed supply worries continue to support prices. Official data revealed that U.S. crude stockpiles fell by 2.547 million barrels in the previous week, surpassing expectations. Market watchers are also closely monitoring developments in the Middle East, fearing that the Gaza conflict could escalate and disrupt oil production. Additionally, reports of Ukrainian drone attacks on Russian refineries and Ecuador’s state oil company declaring force majeure on Napo heavy crude exports due to pipeline disruptions from heavy rains have heightened supply concerns.
US Gas Prices Decline Amid Increased Supply & European Gas Prices Capped by High Storage Levels
US gas prices fell last week as producers ramped up supply to meet rising demand. Meteorologists forecast continued hot weather through at least July 5, which will boost demand for air conditioning. Although US gas production hit a 25-month low in May, it has since increased. However, gas flows to major US LNG export terminals remain below capacity due to maintenance work.
In Europe, TTF and UK gas prices remain capped by ample storage levels, currently over 74% full. Governments aim to replenish inventories further over the summer, but competition from Asia for LNG could drive prices up. Recent outages in Norway caused temporary price spikes, and high temperatures in Southern Europe are maintaining strong power demand for air conditioning. This may explain why the EU has not yet banned LNG imports from Russia. The EU’s latest sanctions package targets the re-export of Russian LNG shipments but does not restrict direct imports.
Gold Prices Correct Amid Strong US Data
Gold prices were set for a weekly rise before robust U.S. data and a stronger dollar led to a 1.6% drop on Friday. This correction prompted ETFs to increase their holdings. Although total gold held by ETFs has fallen by 5.5% this year, prices have spiked by 13%, with bullion trading close to the record high hit in May. Central bank demand is also supporting prices, with the World Gold Council reporting that around 20 central banks plan to increase their gold reserves.
Silver Prices Near One-Month Lows
Silver prices are near one-month lows as markets assess the global outlook for industrial demand. Overcapacity from Chinese government support for solar panels is likely to keep short-term demand for industrial silver subdued. However, easier monetary policy settings should support global production.
Copper Prices Hit Two-Month Low
Copper prices are on a downtrend, reaching their lowest level in over two months. Disappointing production data from China and high inventory levels are weighing on prices. Additionally, the Federal Reserve’s indication of prolonged high interest rates is not helping.
Elsewhere in Agriculture market
Soybean Prices Decline on Improving US Supply
Soybean prices continue to decline due to signs of improving supply in the US Markets are closely watching Brazil’s stocks, affected by adverse weather and heavy flooding. Furthermore, Brazil’s president issued an executive order limiting tax credits for commodity exports, potentially raising export prices. Wheat prices are also sliding, trading at their lowest level in two months, as optimism about US supply offsets concerns about reduced output in Russia, Ukraine, and the EU.
Sugar Prices Stabilize Above 20-Month Low
Sugar prices ended the week little changed, remaining above the 20-month low touched at the end of last month. Concerns about reduced sugar exports from India and adverse weather in Thailand have helped stabilize prices, but strong output expectations from Brazil are limiting sharp price increases. The USDA predicts a 4.7% rise in sugar output for the 2023/24 season.
Cocoa and Potato Prices Update
Cocoa futures have dropped to their lowest level since the end of last month, with Ghana’s cocoa regulator suggesting improved weather conditions will boost production. Despite this, cocoa prices are nearly 150% higher than a year ago, and high prices are reducing demand. Potato prices have also stabilized, although they remain nearly 30% more expensive than a year ago.
This comprehensive overview of commodity markets highlights key factors influencing prices and provides valuable insights for investors and analysts. Stay informed on the latest developments to make well-informed decisions in these volatile markets.
Click here to access our Economic Calendar
Andria Pichidi
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
