Commodities And Precious Metals Update (Week Ending May 22, 2020)

A surprise decline in US oil inventories (especially at the Cushing terminal), dropping U.S. oil production, a continued decline in active U.S. oil rigs along with expectations of greater demand due to easing lockdown restrictions globally and domestically all combined to push WTI and Brent crude oil prices significantly higher last week. Wednesday’s EIA report showed U.S. oil inventory levels decreased by 5 million barrels while Friday’s Baker-Hughes Rig Report showed active U.S. rigs continued to decline, decreasing by 21 to 237.

Base metal prices moved higher last week supported by increased optimism of economic recovery following reports of Moderna’s coronavirus vaccine and easing restrictions throughout the world. Weaker-than-expected economic reports from Europe, China’s abandonment of its GDP growth target and fears of escalating U.S.-China tensions moved most base metal prices off their highs on Friday.

Monday’s Moderna vaccine news and stronger than anticipated economic reports out of Europe as well as large-but-declining initial jobless claims on Thursday pushed gold prices slightly lower on the week. Silver and platinum prices moved higher with base metal prices.

Higher or unchanged through Thursday on adverse weather concerns in the U.S. and Russia, wheat prices dropped sharply on Friday after better-than-expected weather forecasts in these same areas. Kansas wheat prices diverged from Chicago wheat prices, reflecting bumper-crop forecasts for Kansas wheat. Soybean prices suffered from expectations of a large crop this season and lack of Chinese buying. Corn prices suffered from increased plantings offsetting higher oil and gasoline prices. Increased concerns surrounding U.S.-China tensions also negatively affected grain prices.

Coming up this week      

  • Another busy week with an panoply of data being released. Highlights include Fed Chairman Jerome Powell speaking on Friday, consumer confidence and sentiment reports, regional manufacturing index releases and the second estimate for Q2 GDP.
  • Consumer confidence and new home sales on Tuesday.
  • Richmond Fed manufacturing index and Beige Book on Wednesday.
  • Durable goods orders, 2nd estimate for Q2 GDP and jobless claims on Thursday
  • International trade in goods, personal income and outlays, Chicago PMI, consumer sentiment and Fed Chairman Jerome Powell speaks on Friday.
  • EIA petroleum report on Thursday and Baker-Hughes rig count on Friday.
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