Energy Commodities Continue their Supercycle

Highlights:

• ENERGY:
  Brent crude increased by 0.2% at $79.43 per barrel.
  The natural gas price soared by 3.67% to $5.82 per mmBtu in New York. 
• METALS:
  Gold futures for December delivery were trading with a loss of $5.30 at $1,753.00. Meanwhile, silver futures for December delivery slipped by $0.146 at $22.39 an ounce.
  Copper prices improved by 0.2% to $9,147.50 a tonne.
• AGRICULTURAL:
  The most active futures contract for soybeans slipped to $12.35. Meanwhile, corn futures for December lost 2-1/2 cents at $5.39 a bushel.
  

Crude oil rose slightly ahead of the OPEC+ meeting

Brent crude increased by 0.2% at $79.43 per barrel. 

The upward factors behind this movement weakened the dollar and the expectations that the OPEC ministers will maintain a constant rate of increase in supply.

On Friday, the dollar fell for the second consecutive session partially due to the decline in US Treasury yields. Besides, investors reaped benefits after recent solid gains, although it should also be noted that the decline was thought to be temporary.

Last week, the dollar index registered its highest percentage gain since the end of August. Investors were aware of the reduction in asset purchases by the Federal Reserve from November and a possible rate hike.

At the beginning of the week, crude prices were pressured by a substantial rise in the dollar. That helped reduce foreign demand for the asset denominated in dollars. Analysts think that gains could be limited later in the year if the dollar continues to rise on expectations of a stimulus cut and rate hike by the Fed.

OPEC and its allies are meeting today. The group is expected to consider its current agreement. In September, OPEC+ agreed to continue fulfilling its July decision to increase production by 400,000 BPD per month at its last meeting in September.

Four OPEC+ sources said producers were studying the possibility of increasing production beyond what was considered in the agreement. However, no one has given details on how much more or when the supply would increase. 

Strong demand drives gas prices up

The natural gas price soared by 3.67% to $5.82 per mmBtu in New York. 

Natural gas prices returned to a critical technical resistance zone as traders react to strong export demand and high consumption for energy production. 

The fear of supply shortages was reflected throughout the week in the Asian and European markets. It has pushed prices to record levels. However, despite the improvement in the supply outlook in the US, gas prices in the country followed the same path.

As for the weather forecasts, the northern half of the nation is likely to have hot weather. Meanwhile, the lack of strong heat in the southern part of the US could limit demand for refrigeration. 

Gold and silver traded weakly

Gold and silver prices dropped slightly on Monday. Meanwhile, gold futures for December delivery were trading with a loss of $5.30 at $1,753.00. Meanwhile, silver futures for December delivery slipped by $0.146 at $22.39 an ounce. 

Some analysts believe that inflation might be a bigger problem than the Fed thinks. A professor at the University of Pennsylvania, Jeremy Siegel, warned investors of the dangers inflation represents for the markets. He believes the Fed will be under pressure to accelerate the process of withdrawing the aid program, and the market is ready for this yet. 

Low inventories supported copper prices

Copper prices improved by 0.2% to $9,147.50 a tonne, supported by low inventories and concerns about the energy crisis in China. 

Inventories in ShFE warehouses stood at their lowest level since June 2009. LME stockpiles slid by 14% in September.

Since March, copper has not stopped rising. However, JP Morgan closed its bullish call for metal today and other commodities such as aluminum, nickel, and zinc.

The reason why copper has soared has been due to the optimism in recent months about coronavirus vaccines. Above all, it’s been because of the strong Chinese demand that the metal overcame the pandemic and recovered. The copper market is mainly clinging to demand from China.  

Soybeans hit the lowest level in 9 months

The most active futures contract for soybeans slipped to $12.35, the lowest level in 9 months.

It is pressured by the larger stocks in the US and by the impact of the current US harvest. Even so, high oil prices would limit the drops.

Meanwhile, corn futures for December lost 2-1/2 cents at $5.39 a bushel.

The funds increased their net purchased corn position by more than one million tons. However, the pressure of the rapid advance of harvest also limits the increases.