Commodities boom ahead of Fed meeting

Highlights:

• ENERGY:
  September WTI oil is trading with an advance of 0.57% or $0.41. September Brent gained 0.46% or $0.34.
  Natural gas recovered by 0.7 cents to $3.978. 
• METALS:
  Spot gold traded at $1,796.56 per ounce. Silver price is holding at $25.25/oz. Meanwhile, copper dropped by 0.4% from the six-week highs it reached yesterday.
  All eyes on the upcoming Fed meeting.
• AGRICULTURAL:
  Corn futures increased by 0.2% to $5.47-1/4 a bushel.
  Soybean futures were trading stable at $13.59 a bushel.
  

Oil Bounced Expecting a Bullish Inventory Report

Crude oil futures increased early on Wednesday thanks to the American Petroleum Institute report that confirmed that there was a fall in crude oil reserves last week. The news has also offset concerns about rising coronavirus cases and reinforced the belief within the industry that demand will exceed increased supply.

September WTI oil is trading with an advance of 0.57% or $0.41 at $72.06. September Brent oil futures gained 0.46% or $0.34 at $74.82. 

API reported a drop in crude reserves by 4.728 million barrels in the week ending July 23, compared to the expected reduction of 3.433 million barrels. It brought the total crude decrease in 2021 to nearly 54 million barrels. 

The API also reported a reduction in gasoline reserves of 6.226 million barrels in the week ending July 23, compared to an increase of 3.307 million barrels the previous week. Distillate reserves decreased that week by 1,882 million barrels, in addition to the decrease of 1,255 million barrels last week.

Cushing’s reserves declined by 126,000 barrels that week, compared to a decrease of 3.567 million barrels last week.

The weekly inventory report of the US Energy Information Administration will be published today. It is forecast to show a drop in crude oil reserves of about 2.6 million barrels.

Natural gas wavers around $4.00

The latest weather forecasts lowered demand expectations for the beginning of August. The expiring August contract dipped as low as $3.874/MMBtu in the early trading. However, it recovered by 0.7 cents to $3.978.

The natural gas futures contract for September also gained 0.7 cents and was trading at $3.949.

Analysts believe that the market will continue to rise in the long term. Although there is some risk that traders will cut profits. Other than that, the round figure of $4.00 is acting as a significant barrier and could make people gain quickly.

Gold is trading firmly ahead of the Fed meeting

Gold prices traded steady this Wednesday. Spot gold traded at $1,796.56 per ounce. Investors avoided making large bets ahead of the US Fed policy decision.

According to analysts at Credit Suisse, it is a matter of time before gold returns to around $1,900 an ounce. The metal price has been struggling for days to stay above $1,800 an ounce, even though real bond yields are hitting lows.

The Swiss bank report highlighted the fact that, right now, these real returns are lower than in August last year, when the price of gold was trading above $2,000 an ounce.

According to ING analysts, although no changes in Federal Reserve policy are expected at the July meeting, we could hear more details about the discussions around the stimulus cut.

Time to buy silver?

Silver price is holding at $25.25/oz before the Fed meeting. Analysts believe that the white metal is unlikely to remain below $25 for long. Because of that, its recent price dip is a good value grab.

This month’s FOMC meeting can also create some more turbulence.

However, if the Fed displays any degree of uncertainty about the dollar, gold and silver will see another rally. Some analysts even project silver to go up as far as $40/oz.

Copper slipped after reaching six-week highs

Benchmark copper on the LME dropped by 0.4% at $9,719 a tonne after reaching $9,924 on Tuesday.

In May, the red metal posted its historical record hitting $10,747.50. Copper advanced by 26% in 2020 and added 25% this year. Some analysts believe that strong demand and tight supply could push prices higher.

Corn moves higher, soybean is flat

Corn futures edged higher while soybean futures were flat. Both of the commodities were supported by damages to US crops that the recent dry weather is causing. 

The most active soybean futures traded in a stable manner at $13.59 a bushel. 

The most active corn futures increased by 0.2% to $5.47-1/4 a bushel. Even though corn suffered from hot, dry weather in recent weeks, analysts stated that crops passed through the critical growth period.