It has been an exciting couple of weeks for commodities, and traders don't expect things to slow down any time soon.
Oil has been the biggest story, with a number of factors contributing to the downtrend. From a strong U.S. dollar to ample supply and falling demand, bears are clearly in charge. Crude futures touched a multi-year low earlier this week, recently trading just above $77 a barrel. Traders also took note of the Organization of the Petroleum Exporting Countries (OPEC) World Oil Outlook report released this morning, which said that the group sees a slash in demand expectations in the face of rising global production. Oil was trading nearly 2% lower early today.
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“OPEC’s revision to its annual forecast should not be a surprise, given the extent of both non-OPEC production growth and weaker than expected global petroleum demand growth over the past 12 months, although it may still be adding some additional weight on market sentiment,” Tim Evans, energy futures specialist at Citi Futures and OTC Clearing, said in a morning research note. “The key question remains, ‘What is OPEC prepared to do about it?’ and we think the only clear answer will be delivered at OPEC’s Nov. 27 summit.”
Another commodity taking a major hit is gold, which is trading at levels it hasn’t seen since 2010. A strong U.S. dollar has been the biggest factor, but the prospect of rising interest rates has also been a concern. The metal is currently trading around $1145 an ounce, and several traders are calling for it to continue to move lower in the coming weeks.
“I am looking at gold to continue lower and trying to test below $1100 here shortly,” Robert Haberkorn, a senior market strategist at RJO Futures, said. “The threat of higher U.S. interest rates should keep pressure on gold for the next year, and it should be noted that gold will find major support at $1080, which is generally the conscience on the production cost per ounce.”
But as we move into the winter heating season, natural gas has finally gotten a boost. Thursday is set to be its eighth consecutive day of higher moves, as an early winter blast is set to target much of the nation over the coming days. This commodity is still far from the highs we saw during 2013’s brutal winter, but it has moved nearly 20% higher over just the past couple of weeks.
“Colder than expected forecasts for the northeastern part of the U.S. is seen as a bullish factor driving increased demand,” Lannie Cohen, president of Capitol Commodity Services, told Fox Business. “The close on Wednesday was not great, well off the highs, so Thursday's price action should give a good indication if this market can sustain the up move.”