Commodity Calls: Week Ending 19 July 2024

US oil producers do more with less, China’s third plenum disappoints copper traders, and US presidential chaos to increase gold appeal.

Join Global X each week for ‘Commodity Calls’ to explore all the recent signals and developments that occurred in the world of commodities.

Looking for more? Check out this week’s Market Moves and Thematic Spotlight.

Crude Oil

Bullish

  • Russia is implementing additional crude oil production cuts over the next few months to compensate for overshooting the OPEC+ quota in the first half of 2024. The country’s output has already fallen significantly in July, with production sinking to its lowest levels since January.1

Bearish

  • US produced 13.3 million barrels of crude oil per day in July, matching a record high last hit in Q1 2024.2 This is despite a steady decline in the number of domestic oil rigs which are down 10% since April and at its lowest level since December 2021.3
  • Weak Chinese economic data is weighing on oil prices. China’s GDP growth was 4.7% in Q2, significantly below economist expectations of 5.1%, retail sales were also lower-than-expected in June.4

Explore crude oil with BCOM.

Copper

Bullish

  • A 7.4 magnitude earthquake hit Chile’s northern mining region, potentially disrupting operations for some of the world’s most productive copper mines.5 The world’s largest copper mine, Escondida, is one of the mines located near the epicentre of the quake and markets are yet to receive reports of any effects on operations.

Bearish

  • The lack of any meaningful policy shifts coming out of China’s historically impactful ‘Third Plenum’ meeting will likely weigh on copper prices as the country’s property market and retail demand continue to languish.6 Chinese exports of copper jumped by 187% to an all-time high in June as domestic demand showed no sign of recovery.7
  • Global copper inventories have also ballooned in recent months, with stockpiles at the LME more than doubling since May to the highest since September 2021.8 A further 4,000 tonnes of copper cathodes were delivered to LME warehouses in South Korea and Taiwan last week.9

Explore copper with WIRE.

Gold

Bullish

  • Gold bullion price hit a new all-time high of ~US$2487 as traders priced-in rising Fed rate cut odds and rising political instability.10 Hedge fund net-long positions in gold also rose to its highest level since early 2020.11
  • President Biden’s decision to step down from re-election has sparked new political chaos, causing an influx of gold purchases as investors sought protection from market volatility.12 A temporary decline in the USD also supported gold prices.13

Bearish

  • Higher gold prices may dissuade global central banks from further purchases. Central banks have been critical to the gold price over the past 24 months, with at least 10% of its performance in 2023 and a further 5% of performance this year attributable to central bank purchasing.14

Explore physical gold with GOLD.

 

Forecasts are not guaranteed and undue reliance should not be placed on them. This information is based on views held by Global X as at 23/07/2024. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be individual or personalised investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.