NATURAL GAS - Natural gas futures fell sharply last week as investors shifted their focus back to the traditional supply/demand fundamentals once the threat of a hurricane striking Florida was reduced. Traders also reacted to a U.S. government report that showed a higher-than-usual weekly storage build during the previous week and a shift in the weather forecast from usually warm in several key demand areas to cool. Early in the week, investors priced in the possibility that Hurricane Maria would turn northwest and head towards Florida. The state is still trying to recover from the impact of Hurricane Irma so a direct strike from Maria would have been devastating. According to the U.S. Energy Information Administration, utilities added 97 billion cubic feet of gas into storage during the week-ended September 15. This was slightly higher than analysts’ 91 bcf injection forecast.
CRUDE OIL - U.S. West Texas Intermediate and
international-benchmark Brent crude oil finished higher last week in a mostly
lackluster trade. Both markets continued to be underpinned by a bullish outlook
for demand based on reports from OPEC and the International Energy
Administration, however, investors were generally disappointed that OPEC failed
to extend its production cuts program. OPEC failed to reach a decision on
extending its production cuts and may wait until January before deciding
whether to extend their output curbs beyond the first quarter. Russia’s energy
minister said no decision was expected before January, although other ministers
suggested such a decision could be taken before the end of this year. “I
believe that January is the earliest date when we can actually, credibly speak
about the state of the market,” Russian Energy Minister Alexander Novak said.
Other ministers suggested a decision could come this year.
GOLD -
Gold plunged last week as U.S. Treasury yields soared in reaction to a hawkish
U.S. Federal Reserve meeting. The rise in yields helped make the U.S. Dollar a
more attractive investment, reducing foreign demand for dollar-denominated
gold. There was some buying late in the week due to a geopolitical concern, but
the primary catalyst for the selling pressure was the hawkish Fed. The Fed
drove U.S. Treasury yields to a more than two-month high after it said it would
start reducing its $4.5 billion balance sheet starting in October. It also
indicated the possibility of a third rate hike before the end of the year. The
announcement of the balance sheet trimming was the biggest news from
Wednesday’s meeting. All nine members of the monetary policy committee voted
for the action. Current Fed policy requires the central bank to reinvest the
proceeds from maturing bonds. On September 20, the Fed signaled it wants to
wind down those reinvestments this year. As far as reducing the balance sheet
is concerned, Fed officials said that they will reduce it by $10 billion in
Treasury and mortgage-backed securities a month, to start, by allowing bonds to
mature without buying new ones. The central bank also downplayed the impact of
Hurricanes Harvey and Irma on the economy, saying that they “are unlikely to
materially alter the course of the national economy over the medium term,”
other than temporarily lifting inflation because of higher prices for gas and
other goods for which the supply chain was disrupted.
COPPER -
December Comex High Grade Copper futures are trading unchanged based on the
pre-market trade. Despite a potentially bullish closing price reversal bottom
from Friday, there was very little follow-through to the upside. Buyers
attempted to breakout to the upside over $2.9565 but backed away when the U.S.
Dollar Index gapped higher. A stronger greenback tends to limit demand for
dollar-denominated copper. The main trend is up according to the daily swing
chart, however, momentum has been trending lower since September 5. Friday’s closing
price reversal bottom may be the first sign that momentum is getting ready to
shift back to the upside.
Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance.
CapitalStars Investment Adviser: SEBI Registration Number: INA000001647
Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance.
CapitalStars Investment Adviser: SEBI Registration Number: INA000001647
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