COMMODITIES INCLUDING METALS SOAR HIGHER
Oil prices bounced back on Friday, with WTI crude trading above $75 and remaining close to the highest since October 2018 supported by tight supplies and strong demand ahead of next week’s OPEC+ meeting. The cartel is set to meet on Monday to discuss whether to boost production by 400,000 bpd or more in November and December. The crude market is also receiving support from substitution effects amid soaring natural gas prices. WTI crude futures are up almost 2% this week, the sixth consecutive week of gains.
Brent crude futures rose toward $79 a barrel on Friday, getting closer to a three-year high of $80.75 hit earlier in the week and after posting a 9.5% jump in September. Investors' focus shifted to an OPEC+ meeting on Monday, where producers will discuss whether to increase production in November and December to ease supply concerns. The benchmark Brent crude is on course for a 1% weekly gain.
US natural gas futures extended gains to $5.9 per million British thermal units to start the last quarter of the year, a fresh 71/2-year high, as strong foreign demand more than offset prospects of lower domestic demand. A natural gas shortage in Europe has driven prices in the continent to record highs, while inventories in some European countries stood 20% below normal levels ahead of the winter season. In China, imports are almost the double from last year's levels and in Brazil, imports are also near record levels as the country faces its worst drought in 91 years, hurting hydropower output. Adding support to US exports of natural gas, Russian gas flows to Germany have been highly limited as the Kremlin sought to build up inventories at home. In the last week of September, EIA data showed natural gas stocks in the US increased by 12 billion cubic feet (Bcf) last week to 88 Bcf, slightly higher than market expectations of 87 Bcf.
US Gasoline futures extended gains beyond $2.2 per gallon, the highest since August 27th and were approaching a 7-year high of $2.33 touched on July 30th, amid lingering disruptions of supplies. Oil production still lagged behind pre-hurricane levels at some US Gulf platforms, with Royal Dutch Shell warning that the damage to offshore transfer facilities is expected to curb production until early 2022. On the demand side, major fuel importer Japan mulls lifting restrictions by October, building up prospects of a resurgence in foreign demand.
Heating oil futures rose above $2.3 a gallon for the first time since October 2018, amid prospects of rising demand ahead of a colder-than-usual winter in the northern hemisphere. Meanwhile, oil production in the Gulf returned to around the levels they were before Hurricane Ida hit about a month ago. The EIA Petroleum Status Report showed US distillate stockpiles, which include diesel and heating oil, rose by 0.385 million barrels last week, defying market expectations of a 1.648 million fall. At the same time, heating oil inventories decreased by 0.366 million barrels.
Gold prices eased to $1,753 an ounce on Friday after rallying to $1,760 in the prior session, amid the dollar strength, rising government bond yields, and expectations the US Federal Reserve would start reducing its massive bond-buying in November. Earlier this week, Fed Chairman Jerome Powell said that supply chain issues could cause inflation to last longer than the Fed had previously thought. For the week, the yellow metal is on track to rise around 0.3%.
Silver extended losses below $22 per troy ounce, the lowest since July 2020 as the dollar index continued to march higher to a near 11-month high on rising prospects the Federal Reserve would start cutting back on its monetary stimulus as soon as November and that a rate hike could follow in 2022. Also, Norway's Norges Bank became the first major western central bank to raise rates and the Bank of England noted that the case for modest tightening strengthened.
Copper futures fell below $4.2 per pound, the lowest since September 21st amid concerns over demand due to Chinese power restrictions, put in place to keep emissions in check. The National Development and Reform Commission, Beijing's top economic planner, said on Friday it would work to resolve the power shortages that have plagued production since June. Capping losses was data from the Shanghai Futures Exchange showing copper inventories in top consumer China fell for the seventh straight week to their lowest since June 200.
