Gold & Crude Oil, The Fundamentals

$GLD, $SLV, $OIL, $USO, $UNG

Crude Oil prices rallied last week with the WTI Crude Oil contract +10.59% and the Brent Crude Oil contract +6.33%.

Below are Key reasons for the strength.

The US weekly inventory report suggests that both gasoline and distillate stockpiles fell in the week ended 19 February as demand increased.

This might indicate that falling Crude Oil prices are eventually lifting duel demand.

On that notion, traders moved to close short positions as the front-month Brent contract that expires on Monday.

Also, Venezuela confirmed that Russia, Saudi Arabia and Qatar agreed to meet in March on output discussion.

Venezuela’s Minister for Oil and Mining Eulogio Del Pino said, “we have talked with Russia, Saudi Arabia and Qatar ministers to invite them for an extended meeting… The purpose … is to invite other OPEC and non-OPEC nations to settle their production levels until June to reach a balance in prices”.

NYMEX Nat G price finished -0.72% on the week, the 4th week running of declines.

The EIA reported that Nat Gas storage fell -117 bcf to 2 584 bcf in the week ended 19 February. Stocks were +615 bcf higher than the same frame last year and +577 bcf above the 5-year average of 2 007 bcf.

Bakers Hughes (NYSE:BHI) estimated that that the number of gas rigs added 1 unit to 102 in the week ended 26 February.

In terms of drilling types, directional rigs dropped 1 unit to 47, horizontal rigs plunged 19 units to 397 and vertical rigs rose 8 units to 58.

The number of oOil rigs fell -13 units to 400, making the total number of rigs -12 units lower to 502 units.

Precious metals retreated for a 2nd consecutive week as risk appetite improved.

Gold price is hanging around the recent trading range, which is at the highest marks since Q-1 of Y 2015.

Note: precious metals have been performing well since the beginning of the year with Gold up 15% and Silver up 6.6%.

My works shows that this strength is driven by increasing volatility in the financial market and growing uncertainty in global economic outlook, especially emerging economies.

Further, dampened hopes of Fed funds rate hike in March and the total numbers of rate hikes this year have also supported Gold.

Have a terrific weekend.

Paul Ebeling

HeffX-LTN