Commodity market overview for 16.11.18

This week commodity markets has demonstrated some confounded results. During the last trading day oil has partially won its weekly losses, remaining at a significant minus in the end. Natural gas surprised with its volatility – within one day it increased by 18% without ample reasons, and after 24 hours decreased by 17%. The last trading day has brought +8% to gas quotes, closing with positive trend in the end of the week. Gold also demonstrated some insignificant growth on Friday.

1. Oil is partially winning its losses

By the end of Friday Brent oil has increased by 0.57% closing at the level of USD 67 per one barrel. Daily volatility rate: USD 66.14 – 68.38, which can be described as pretty narrow corridor. Friday trades were quite sluggish; “bulls” were trying to win some week’s losses, but based on the 5 days’ result, quotes demonstrated losses.

The main influencing factors are:

– Investors’ overestimation of impact of the sanctions against Iran and consequently – excess of supply over demand.
OPEC oil production level growth.

It is quite possible that the price will return to the level of USD 70 on Monday-Tuesday of the next week, but so far oil market is full of pessimism.

2. Natural gas – the most profitable and the most unpredictable instrument

On Friday, the increase of natural gas quotes was 8.4%, bringing investors more than 10% profits per week. This instrument might be described as one of the most profitable, if it weren’t for the fact that nobody could predict further price movement.

What militates in favor of quotes growth is fuel reserve level in storages along with the cold winter, similar to that which was last year. This will lead to even more expensive gas. The only question is whether the forthcoming winter will be cold?

On Thursday, the North-East of the United States has been covered by the fist snow storm in this season, which caused sharp increase of gas sales. But instead of getting more increased, future prices have lost 17% in a few hours. Analysts attributed it to an extension of the delivery time under futures contracts, which fulfillment term occurs only in December-January. In other words, “bears” achieved psychological victory, by showing that prices were extremely high, even in spite of the approaching heating season. So far, at an annual rate, gas remains the most profitable asset, bringing investors 43% of profits starting from 1st of January, 2018.

3. Gold and silver get a boost

Precious metals, regarded as a safe heaven, have got a strong boost in the end of the week. This allowed them to close with a positive trend in the end of the week:

  • On Friday gold has increased by 1.9%, closing at the level of USD 1 222.00 per troy ounce. Daily rate was USD 1 213.7 – 1 225.9. Despite the drawdowns in the middle of the week, quotes have closed with a positive trend in the end of the week. On a year-on-year basis investors are still at a loss by 4.34%.
    Silver has increased by 3.14% by the end of Friday. Is has also demonstrated some profit in the end of the week. The point is that, by contrast with the investments in gold, the investors’ losses has been 15.63% since the early 2018.
  • So far metals support the collapsing stock market and oil. And since there are no drivers for their reverse on the next week, next 5 days should be quite favorable for gold and silver. Truly speaking, this trend will hardly be intermediate.