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Energy & Precious Metals - Weekly Review and Calendar Ahead

CommoditiesAug 15, 2021 07:33AM ET
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 By Barani Krishnan

Investing.com -- Is it the oil bull’s bogeyman? Or will the Delta variant hurt real - not just implied - demand for energy?

As one can imagine, it’s too early to tell, though the popular belief is that it won’t have the sort of devastating impact on energy markets as the original Covid-19.

And that’s probably true, thanks to the knowledge and experience we have cultivated over the past 18 months in dealing and living with the virus in our midst.

We also have vaccines and half or more of the population inoculated in some countries, including the United States - though the efficacy of existing shots against Covid variants and mutants being discovered each day is unknown.

What's certain is that the pandemic is far from over, as much as oil bulls wish it were.

And the statistics will prove it. ​An average of roughly 124,200 coronavirus cases were reported each day in the United States alone in the week to Thursday, an increase of 86% from two weeks ago. Average daily hospitalizations are up to more than 68,800, an 82% increase over the last two weeks. The number of new deaths reported is up by 75%, to an average of 552 deaths per day.

“Delta is the new normal of Covid,” John Kilduff, founding partner at New York energy hedge fund Again Capital, said this week. “It will hamper daily activity, and, as a result, some of the oil demand that goes with that, as hard as those long the market might want to deny.”

This week again, the variant’s impact on oil - implied, as it may be, at this point - was proven as the story in crude hardly got any better after the previous week’s price plunge.

The insistent drone of the Covid narrative, via the Delta variant, and a dismal U.S. consumer reading for August put paid to any comeback by crude prices on Friday.

U.S. crude scraped together a tiny gain for the week, while Brent couldn’t even manage that.

Oil “is in a bit of a no-mans-land and it could take a few days to gather steam for another run,” Phil Flynn, analyst at Chicago’s Price Futures Group and a self-confessed oil bull, said. “If Covid concerns ease a bit then reports of falling global oil inventories should ignite another rally.”

Flynn’s remarks came after the watchdog for western oil consumers warned on Thursday that Covid’s Delta variant will slow down demand growth for energy in the second half of the year.

The outlook by the IEA, or International Energy Agency, came on the same day that OPEC, or the Organization of the Petroleum Exporting Countries, issued its oil demand forecast for 2021 and 2022. OPEC kept its forecast unchanged despite the risk of the Delta variant.

The IEA, on its part, put last month’s demand slump for oil at 120,000 bpd, or barrels per day. It also predicted growth to be half a million bpd lower in the second half than it had originally estimated in July.

Adding to the pessimism of the IEA, the University of Michigan said on Friday its closely followed U.S. Consumer Sentiment Index plunged to a decade low in August on concerns about another economic slowdown due to the Delta variant.

Oil Price Roundup

New York-traded U.S. West Texas Intermediate crude, the benchmark for U.S. oil, settled down 65 cents, or 0.9%, at $68.44 per barrel. For the week, it rose 0.2% - barely a makeup for last week’s 7.7% plunge, which was its sharpest since October 2020.

London-traded Brent, the global benchmark for oil, settled down 72 cents, or 1%, at $70.59. For the week, Brent fell 0.2%, after last week’s 7.4% drop.

Energy Markets Calendar Ahead

Monday, Aug 16

Cushing inventory data from surveyor Genscape

Tuesday, Aug 17

American Petroleum Institute weekly report on oil stockpiles.

Wednesday, Aug 18

EIA weekly report on crude stockpiles

EIA weekly report on gasoline stockpiles

EIA weekly report on distillates inventories

Thursday, Aug 19

EIA weekly report on natural gas storage

Friday, Aug 20

Baker Hughes weekly survey on U.S. oil rigs

Gold Market & Price Roundup

Gold finished with a weekly gain of 1%, after the meltdown that took it to sub-$1,700 levels.

But the recovery was far from the fabled likes of a phoenix rising from its ashes. As the dust settled on Friday’s trade, longs in the market were still short of recapturing the key $1,800 level that would be prerequisite to the yellow metal regaining some bullish shine.

Gold’s front-month on New York’s Comex settled the day up $26.40, or 1.5%, at $1,778.20 an ounce.

It was a comeback of sorts for the benchmark gold futures contract that just on Monday settled at its lowest since March 31, at $1,726.50. Also, prior to the start of this week’s U.S. session, the front-month contract plunged to $1,672.80 in Asian trading in what has largely been characterized as a “flash-crash”.

Analysts acknowledged the rebound but noted that gold was stuck now in a $1,740-$1,760 range since and said it needed to do more to return to a bullish track.

“If it can break above here, it would be quite the turnaround but I'm not convinced (that) would be sustainable,” said Craig Erlam, analyst at New York’s OANDA.

Erlam also said there could be fresh trouble for gold longs as the Federal Reserve’s Jackson Hole symposium neared, saying: “I’d be surprised to see any significant gains ahead of the event.”

The Jackson Hole gathering in Wyoming is an annual retreat for the Fed to examine key strategies for U.S. monetary policy. There is high speculation that this year’s event, scheduled between Aug 26 and 28, will discuss the tapering of the $120 billion in monthly stimulus that the central bank has been providing the economy since the Covid outbreak of March 2020.

Speculation about a stimulus taper has heightened since last week’s upbeat U.S. jobs report for July that sent the dollar and U.S.  U.S. bond yields rallying, crushing gold.

Since January, gold has been on a tough ride that began in August last year - when it came off record highs above $2,000 and meandered for a few months before stumbling into a systemic decay from November, when the first breakthroughs in Covid vaccine efficiencies were announced.

After initially bottoming out at under $1,675, gold appeared to break its dark spell with a bounce back to $1,905 in May. From there, it saw renewed short selling that took it back and forth between $1,700 and $1,800 for a while before last week’s move toward $1,600.

 Disclaimer: Barani Krishnan does not hold a position in the commodities and securities he writes about.

Energy & Precious Metals - Weekly Review and Calendar Ahead
 

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Comments (6)
Peter BullMarket
Peter BullMarket Aug 15, 2021 2:29PM ET
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in regards the gold flash crash on Sunday 6:30 am when the market was still closed and somebody dumped 5 billion in paper gold, there is no other explanation than market manipulation. If you want to sell anything, you would try to get the best possible price, not selling it cheap after a price pullback of Friday. Also, why would you sell on Sunday and the markets are close for trade and there are no buyers around???? soon we will here the same old excuse that some big fund had "margin calls" and had to sell some asset, in this case gold
Barani Krishnan
Barani Krishnan Aug 15, 2021 2:29PM ET
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Totally, Peter!
Kevin Burr
Kevin Burr Aug 15, 2021 2:29PM ET
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Asia was opend at that time !!! Dont you know the market Times over the world ? USA isnt the only country in the world you know
Barani Krishnan
Barani Krishnan Aug 15, 2021 2:29PM ET
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Kevin Burr  Yes, you're right: Asia was open but volume was extremely thin then, as it is typically in Asian hours. So, the dump was planned, but it couldn't sustain at the sub-$1700 level. That's Peter's point.
ROBERTO CARLORITA
ROBERTO CARLORITA Aug 15, 2021 2:29PM ET
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does that mean the gold will rise further?
Barani Krishnan
Barani Krishnan Aug 15, 2021 2:29PM ET
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ROBERTO CARLORITA  Theoretically, it could.
Todd Gray
Todd Gray Aug 15, 2021 10:58AM ET
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gold and silver have backed & filled since april of this year - correcting over exuberance. last week, it touched support of 4 year trend. goes up from here.
Barani Krishnan
Barani Krishnan Aug 15, 2021 10:58AM ET
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That's the logic, Todd. But you need the JPMs to step aside to allow that to happen.
Tyrone Jackson
Tyrone Jackson Aug 15, 2021 10:21AM ET
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Fed is going to raise rates with Delta covid running rampant in the US? Not a chance. Raising rates will kill the job market, crush the real estate market, and slow auto sales. All the markets that they need to get healthy. They will talk about talking about thinking about raising rates but will never raise it even .10% Of course the markets will flash crash - rocket higher and confuse everyone. That’s the ppt trying to control everything.One thing is for certain, inflation is everywhere, thanks to Biden. And inflation hurts the poor the most. The very same inner city poor that voted for him. Lol Does not matter if you make 150k or 25k The prices are the same for everyone at the grocery store and gas pump. Good luck trying to get a immigrant father of 5 in Santa Fe springs to buy a electric automobile. Even tacos at the taco truck will cost him 60 bucks to feed 5 kids and his wife.
Barani Krishnan
Barani Krishnan Aug 15, 2021 10:21AM ET
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A Fed rate hike is almost certainly out of the question for now but that will not stop FOMC officials from talking. They will talk and talk and talk, and in that process, add to the senselessness of the markets. The amount of Fed jawboning that goes on each week is unbelievable. I think the districts get paid when the Fed chiefs do their speaking rounds; that's probably what's fueling it. The net effect is more confusion for markets day in and out with the non-stop bombardment of both hawkish and dovish talk. Imagine watching an entire day of CNBC with everyone appearing talking his book. That's what listening to these Fed speakers does. You'd come away no wiser.
ROBERTO CARLORITA
ROBERTO CARLORITA Aug 15, 2021 10:21AM ET
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wipe your mo*uth before talking about the best president in the world. you can't accept the f@ilure of Trump's defeat and want to blame Biden on everything. Trump is responsible for the bad administration of the USA.
Tyrone Jackson
Tyrone Jackson Aug 15, 2021 10:21AM ET
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Yes Barani, you are very right. I believe it is their intention to talk and talk . It was never like this before. That’s why I am very conservative when it comes to these markets. One fed member saying something outside of his office can crush or skyrocket the dx, PM’s yields and the S & P. The new normal. I believe the Fed along with the Ppt, and all of their proxy banks and brokerages, use their power to run stops. That is my opinion
MAP SR
MAP SR Aug 15, 2021 9:21AM ET
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Next FOMC rate decision September 21-22.
Barani Krishnan
Barani Krishnan Aug 15, 2021 9:21AM ET
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Yes, that's the schedule.
Todd Gray
Todd Gray Aug 15, 2021 9:21AM ET
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I think they'll wait a little longer.
Barani Krishnan
Barani Krishnan Aug 15, 2021 9:21AM ET
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Meeting will be as per schedule, Todd, but decision will, of course, be delayed.
Cathy Bartlett
Cathy Bartlett Aug 15, 2021 8:21AM ET
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Gold and SILVER will rise like the fabled bird once people realize the petro dollar is toilet paper and it no longer holds reserve currency status..Gold will reach $ 5,000 an ounce and SILVER $ 400 once. The likes of JPM keep dumping Gold & Silver to prevent prices from being where they should have been a long time ago. Eventually people will wake up from there daily stupor and realize P. metals and Bitcoin are REAL/hard $$$$ and not monopoly funny money like worthless fiat currencies....
Barani Krishnan
Barani Krishnan Aug 15, 2021 8:21AM ET
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Logically, gold should be at least around $2,500, if not for the (unofficially Fed-sanctioned) manipulation by JPM and Nova Scotia.
James Johannsen
James Johannsen Aug 15, 2021 8:21AM ET
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us debt clock has some pretty interesting numbers
Mark McMillan
Mark McMillan Aug 15, 2021 8:18AM ET
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OPEC will he a handle on the price. Americans are definitely not going back to lock downs. the agenda of using covid as political tool and now a market manipulator is coming to light for many.
ZS Beck
ZS Beck Aug 15, 2021 8:18AM ET
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It will be no more lockdown. No government or economy can afford any more lockdown. It's more likely will be a mandatory vaccine.
Barani Krishnan
Barani Krishnan Aug 15, 2021 8:18AM ET
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Let's see. There's something more powerful than OPEC: the world economy.
 
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