Delta Drives cut into petroleum and copper for purchase; Stable gold before the storm


Energy

The rally in crude oil at the end of July ran out of steam after market attention shifted more and more from OPEC + to Asia, and in particular China, where the variant of the coronavirus delta continued to rise. spread, putting a cloud over the near-term demand outlook. As a result, the net long of WTI and Brent was reduced from 18.4,000 combined lots to 614,000 lots, reversing a third of what had been added the previous week. The bulk of the change was driven by a lengthy liquidation with no signs of increasing short selling activity.

The purchase of natural gas in four deliverable and forward swaps on Henry Hub was, despite soaring prices, reduced by 4% to 312,000 lots. This is the fourth consecutive week of net sales as the price continued to climb, and it closed the week at $ 4.14, the highest since December 2018 in response to warm weather and robust export from LNG raising concerns about insufficient stocks for the coming winter. .

After the worst week for crude oil in ten months, the market will closely follow the EIA’s monthly oil market reports on Tuesday, followed by the IEA and OPEC on Thursday for any signs of a change in the outlook for Requirement. The rapid spread of the delta variant of the coronavirus in Asia and parts of the United States has seen market attention revert to demand concerns over OPEC’s ability to keep prices strong by maintaining sufficient supplies. tight.

Metals

Long gold, much like price, was held steady with a small net addition of just 851 lots masking a pickup in interest in short selling as traders increasingly saw the risk of a downward move. in response to gold’s failure for a week to respond to a sharp drop in US Treasury yields. A concern that was confirmed on Friday, when the very good US jobs report helped push an already weakened price over the edge to record its biggest drop in seven weeks.

Meanwhile, silver saw the long net receive a 22% increase, but the only driver being short coverage. The copper was sold net with concerns over the virus outweighing the risk of a supply disruption linked to a strike in Chile, the world’s largest producer.

With the market focused on jobs for now, the short-term direction for precious metals could be dictated by US inflation – the other part of the Fed’s mandate – with the July CPI expected on Wednesday.

Today’s flash crash

Gold (XAUUSD) and silver (XAGUSD), already under pressure following the stronger-than-expected US employment report on Friday, suffered a flash crash during the early parts of the Asian session. After Friday’s weak close, both metals remained vulnerable until the open, and with Singapore and Japan on vacation, the Asian opening offered even less liquidity than normal. Within minutes, gold fell more than 4% while silver fell 7%, before matching losses before the European opening.

Gold traders have been rocked by the odd behavior of gold in recent weeks when lower yields failed to raise the price, while last week’s small rally in yields triggered an immediate and strong negative response. . This type of capitulation can often coincide with a significant bottom in the market, but for this to happen, economic data is needed to become more favorable to gold.

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