Gold rose last week, oil dipped sharply, copper was weaker and long-dated US bond yields ended the week at all time lows. All more evidence of the confusion in financial markets at the moment.
But it was the sell-off in oil that was the major event in commodities last week and suddenly some analysts are talking about oil falling back under $US40 a barrel.
While oil futures finished Friday a little higher on the day after the strong jobs report for June, crude prices suffered a weekly loss of more than 7% – the largest since early February.
Marketwatch.com reported that the slow fall in US oil stocks and another rise in oil rig use is changing views about the outlook for oil prices. August West Texas Intermediate crude rose 27 cents, or 0.6%, to settle at $US45.41 a barrel in New York to be down 7.3% for the week.
In London, September Brent crude on London’s ICE Futures exchange added 36 cents, or 0.8%, to $US46.76 a barrel. For the week, it also lost around 7%. The reason for the big losses was the sharp fall in prices on Thursday of 4.8% and 4.9% respectively for US and Brent crude futures.
“Trouble was brewing in the oil trade [with] poor support for prices in much of the session,” Richard Hastings, macro strategist at Seaport Global Securities, told Marketwatch.com.
"Petroleum product volumes are too high, and our exports cannot grow sufficiently, or fast enough, to adjust this,” Hastings told Marketwatch “Throw in some evidence of a few more rigs, then the story turns to more U.S. onshore production, not less.”
Baker Hughes’ weekly rig report showed the number of active US oil rigs rose by 10 to 351 in the latest week. That’s the fifth weekly climb in the past six weeks.
“Lower petroleum prices and refiner margin pressures are pushing back upon crude oil, infecting crude oil itself from multiple other directions,” said Hastings. “There is hope for a better situation in 2017, but this is only the middle of 2016. West Texas Intermediate prices could revisit the lower $40s before some stability returns.”
On top of this, the weekly report from the Energy Information Administration showed US crude and gasoline supplies fell less than expected for the week ended July 1, despite expectations for a much larger slide.
WTI oil prices had touched highs near $US46 a barrel after the June jobs report revealed that 287,000 new jobs were created last month – the strongest performance in eight months. And August natural gas futures fell around 6% to end last week at $US2.801 per million British thermal units.
While gold futures fell on Friday following the better-than-expected June jobs report, they still ended the week higher for the sixth week in a row. Comex August gold fell $US3.70, or 0.3%, to settle at $1,358.40 an ounce. That was after an early $US24 plunge in the minutes after the release of the jobs report.
Gold still ended the week up 1.5%.
Gold though is attracting more support – Bank of America Merrill Lynch is the latest to boost estimates for the metal this year – the firm sees prices reaching $US1,500 an ounce by year’s end.
Gold is seeing record buying, according to the most recent weekly report from Bank of America Merrill Lynch. The report showed that $US4.1 billion poured into precious-metals funds in the week ended last Wednesday.
The firm said that was the largest inflow on record for figures stretching back to 2005.
Comex September silver added 26.1 cents, or 1.3%, to end the week on $US20.099 an ounce. Comex silver futures ended up adding 2.6% over the week. September Comex copper futures lost 4.4% last week in closing Friday at $US2.119 a pound.
The rally in bonds though should be watched by all investors because of its potential to destabilise other markets if something happens to prick what looks like a pretty big bubble.
Friday’s jobs report saw a mixed day’s trading for bonds – the yield on the 2-year US Treasuries rose 2.4 basis points on the day and 2 basis points over the week to 0.613%, a ten-day high.
But long-term yields ended lower (at record lows) after an early kick higher after the jobs report was released.
Fresh record lows for both the 10-year and the 30-year benchmarks were reported at the close.
The 10-year Treasury yield lost 2 basis points on the day and 8 over the week, closing at 1.366%, an all-time low, while the 30-year yield shed 3 basis points on the day and 13.8 basis points over the week to 2.110%, also its lowest-ever level, according to data firm Tradeweb.
