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The Dollar’s Rise Represses Commodity Prices

Highlights:

  • ENERGY:
    WTI crude oil was trading with a rise of 0.51% to $68.70 per barrel. Meanwhile, Brent crude traded 0.38% higher at $71.96 per barrel in New York.
    The natural gas price was trading with a rise of 1.09% at $4.61 per mmBtu in New York.
  • METALS:
    Spot gold was added 0.3% at $1,798.98 per ounce. US gold futures added 0.2% to $1,801.40.
    Silver gained 0.2% to $24.34 per ounce.
    Copper futures slipped by 0.62% to Rs 706.90 per kg in India.
  • AGRICULTURAL:
    The price of soybeans fell by $3.3 to $468.1. On the other hand, corn lost $4.7 to $195.3.

US Oil losses from Hurricane Ida are the worst in 16 years 

WTI crude oil was trading with a rise of 0.51% to $68.70 per barrel. Meanwhile, Brent crude traded 0.38% higher at $71.96 per barrel in New York. Oil started recovering after some reports showed that Gulf of Mexico oil producers had slowly made progress recovering some of the production. However, a strengthening dollar could limit gains that could reduce foreign demand for crude denominated in that currency. Buyers are also reluctant to add positions amid concerns about the impact of rising covid-19 infections on demand.

According to Reuters, the damage caused by Hurricane Ida on US energy production offshore makes it one of the costliest.

It blocked most of the offshore oil and gas production for more than a week. About 79% of the region’s offshore oil production remains closed.

Some 17.5 million barrels of oil have been lost to the market to date, and shutdowns are expected to continue for weeks. 

On Friday, disappointing US employment data was released indicating that the economic recovery could be stalled amid a resurgence in coronavirus infections. 

However, to end on a positive note, China’s crude imports increased by 8% in August compared to the previous month.

 

Weather forecasts provide less support to the natural gas market

The natural gas price was trading with a rise of 1.09% at $4.61 per mmBtu in New York. However, the commodity experienced an unexpectedly sharp drop in the previous session. The sector continues to suffer from a series of production outages in the Gulf of Mexico. However, it appears that sellers have already incorporated that news into the price. Now they are updating prices considering the possibility of milder temperatures in mid-September.

Bespoke Weather Services has observed that some production is becoming available in the markets again. It is recovering to the level of 91 billion cubic feet per day that used to be obtained daily in the 48 continental United States.

Bespoke specified that the bearish component seems to come from a loss of industrial demand after the impact of Hurricane Ida. This is why estimates are increasing on the rise in reserves that EIA is likely to publish this week.

One might think this is a short-term problem because other components of the balance between supply and demand are still solid. However, analysts believe that after such an explosive upward movement in the last two weeks, there is a possibility of correction as soon as the data show a downward bias.

 

Gold and silver recovered, how about copper?

Gold experienced a rebound on Wednesday after a sharp drop in the previous session. 

Spot gold was added 0.3% at $1,798.98 per ounce. US gold futures added 0.2% to $1,801.40.

Xiao Fu from Bank of China International stated that the yellow metal is holding up towards $1,800. However, there are some weaknesses in the equity market due to growth concerns.

Nicholas Frappell, Global General Manager at ABC Bullion, expects gold to recover to $1,807, possibly $1,815, in the short term. 

Meanwhile, the dollar index rise is limiting the precious metal’s appeal.

As for silver, it gained 0.2% to $24.34 per ounce. 

Copper contracts for the September delivery on MCE yielded Rs 4.40, or 0.62%, to Rs 706.90 per kg. Market participants cut their positions amid diminished demand in the domestic market.

 

A stronger dollar put pressure on corn and soybeans prices

The price of soybeans fell by $3.3 to $468.1. On the other hand, corn lost $4.7 to $195.3.

The consulting firm Commodity Weather Group increased its yield estimates for US soybeans. Traders keep focusing on progress in the ports of Louisiana in the face of the hurricane. They are trying to define the path that exports will take. 

The greater strength of the dollar is one of the reasons for the loss of grain commodities prices. In addition, the damage caused by Hurricane Ida affected soybeans exports in the US. Last week, the country shipped 68,000 tons of soybeans, 82% less than the previous week’s estimates. 

The corn market is focused on the yields of the next USDA monthly Supply and Demand report, days before the harvest begins.

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