Commodities Corner: Second Fiddle – ShareCafe
Commodity prices fell last week after the Fed’s 0.75% rate hike and more modest central bank hikes in the UK, Brazil and Switzerland took markets out of their grips. cocoons.
As attention focused on the weekend’s sharp falls in equity markets, commodity prices saw a major shake-up, with prices for oil, copper, silver and iron ore taking a hit. sharp drop on Friday.
Iron ore prices ended at their lowest in six months at around US$121 per tonne for 62% Fe fines delivered to northern China.
Rate hikes and fears of recession after the Fed stun shook confidence in oil and other commodities.
A stronger US dollar in the wake of the Fed hike also hit commodities. Meanwhile, bond yields stabilized and rose, but the stronger greenback on Friday sent the Australian dollar back below 70 US cents for the second time in a week.
Oil prices fell more than 6% to a four-week low on Friday on fears of interest rate hikes by major central banks and as traders began to focus on the president’s meetings Biden in Saudi Arabia, even though they are only a month away.
There are fears the meeting could see the Saudis increase production or scrap the OPEC+ production cap.
U.S. West Texas Intermediate (WTI) crude slid 6.8% to end at $109.56 a barrel on Nymex in New York for the biggest single-session decline since March 31. Oil rallied to just over $110 a barrel late in Friday’s trading.
Brent crude futures (the world’s benchmark crude) fell nearly 6% to just over US$113 a barrel (then rose slightly in after-hours trading).
For the week, Brent Crude was down 7.3% and WTI fell 9.2% in one of the biggest weeklies for commodities this week.
U.S. rig utilization rose again last week – up seven to 740 on Friday. This is the highest level since March 2020.
The number of oil rigs increased by four to 584, the highest level since March 2020. Gas rigs increased by three to 154, the highest since September 2019.
The number of platforms increased for 22 consecutive months until May. But crude oil production has remained largely flat in recent months.
It rose to 12 million barrels per day, the highest level since April 2020, according to data from the US Energy Information Administration last week.
US natural gas prices (on Nymex) fell 7% to US$6.94 per million British thermal units, ending below US$7 for the first time since late April after the shutdown the Freeport LNG facility in Louisiana following a fire.
This reduced US export capacity by about a third at a time when demand in Europe was increasing.
Other raw materials were also affected.
Iron ore fell for a sixth session on Friday, its biggest weekly decline in six months, as Chinese steel mills opted to cut output amid weak profits and deteriorating demand prospects.
Benchmark fines of 62% Fe imported into North China fell 5.76% to US$121.64 per tonne, the lowest since Dec. 17.
This is despite production data showing another near-record month for crude steel production in May, following a strong month in April that saw production rise by 192 million tonnes for the two months.
Copper prices fell sharply to end just above US$4.01 per pound in New York. The 6.6% decline for the week ignored Chinese production (and past trade data) and reacted negatively to central bank rate hikes and general gloom.
Copper on the LME fell to $9,100 a tonne, down nearly 15% from its annual high in March. Comex gold and silver were hit by the Fed’s aggressive monetary policy last week, which hit Comex gold futures which fell 1.9% last week to end at $1,840.60 an ounce.
Silver Comex eased 1.55% to US$21.73 an ounce.
Grain futures were mixed – wheat on hold as traders waited for the latest information on the state of the US falls and approaching harvest, with the amount of grain exported stuck in Ukraine due of the war which should triple by the end of the year to reach 75 million tons according to Ukrainian data.
Corn prices recovered to nearly US$8.00 a bushel and sugar prices were firm with rumors of further bans coming out of India.