Commodities Corner: Rust Never Sleeps

With the notable exception of iron ore, commodities had a solid end to a positive week as market fears eased over the pace of inflation and central bank interest rate rises.

Fears calmed in the wake of a small fall in US annual inflation to 8.5% in July from 9.1% in June, no rise on a month to month basis, a surprise dip in producer prices and a fall in import prices

The inflation news saw the value of the US dollar ease over the week and interest rates rise, then fall back by Friday. That helped the CRB Commodities Index rise 3.6% in just five days.

Brent crude futures ended up 3.4% for the week at $US98.15 while US West Texas Intermediate crude added 3.46% for the week to end at $US920.09 a barrel.

The rise came as the International Energy Agency (IEA) pointed out that supply is rising – a point that knocked prices earlier in the week.

With an average of 100.5 million barrels a day in July, global supply is approaching the highest levels since January 2020, just before the start of the pandemic.

Yet demand remains strong. With the agency having revised its 2022 estimate upward by 380,000 barrels a day to 99.7 mb/d.

US oil and gas rig numbers rose last week.

The number of active US rigs drilling for oil was up by 3 to 601 in the week ending August 12 according to Baker Hughes. Gas rig numbers fell 1 to 160.

Total rig numbers fell 1 to 763, up 55% on a year ago after the number of non-oil and gas rigs operating fell by 2.

US crude production is forecast to rise from 11.3 million barrels per day (bpd) in 2021 to 11.9 million bpd in 2022 and 12.7 million bpd in 2023, according to the US Energy Information Administration.

That compares with a record 12.3 million bpd in 2019.

Except for iron ore which went nowhere, metal prices mostly rose.

SGX iron ore futures ended $US109.44 a tonne for 62% Fe fines delivered to northern China, up 34 cents from a week earlier.

Gold finished at $US1,1818 on Comex in New York after market after settling around $US1,815 a tonne. Gold was up 1.5% for the week

Comex sliver rose 3.3% at $US20.67 an ounce.

Comex copper continued to recover with a 3.4% gain for the week to end at $3.67 a pound.

Corn prices recovered in Chicago, while wheat remained soft.

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