Trade Deal Hopes Support Crude, Gold, While Cold Forecasts Encourage Natural Gas Shorts to Cover

Three key commodity markets posted solid gains last week with hopes of a U.S.-China trade deal influencing the price action in two, and the weather supporting the other. Good or bad, the news that the United States and China appear to be heading into the home stretch for getting a trade deal on paper before the March 1 drove the price action in crude oil and gold, while forecasts for an early March cold spell underpinned natural gas.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures hit their highest levels since late November on the hopes that a U.S.-China trade deal will soon be reached. The markets have been primarily supported since late December by the OPEC-led production cuts, but have been helped since the start of February by U.S. sanctions against Venezuelan exports. The extra boost is being provided by optimism that a trade deal will help revive China’s economy, which would lead to increased demand for crude oil.

For the week, April WTI crude oil settled at $57.26, up $1.28 or +2.29% and May Brent crude oil closed at $67.25, up $1.03 or +1.53%.

Comex Gold

Gold futures went on a roller-coaster ride last week, first rallying to a 10-month high before giving back most of those gains then rebounding late in the week to settle higher.

Early in the week, the market was driven higher by a weaker U.S. Dollar, which led to increased foreign demand for the dollar-denominated asset. Optimism around U.S.-China trade discussions dimmed the dollar’s appeal.

Gold prices peaked for the week after the U.S. Federal Reserve’s Monetary Policy Meeting Minutes were perceived as less-dovish. This helped drive up U.S. Treasury yields, helping to make gold a less-attractive investment. Higher rates reduce investor interest in non-yielding bullion. Gold was able to bounce back, however, on Friday to post its second weekly gain as disappointing U.S. economic data stoked worries about a global slowdown.

For the week, April Comex gold settled at $1332.80, up $10.70 or +0.81%.

Natural Gas

Natural gas futures rallied last week on the back of weather forecasts that pointed toward increasing demand. Although the latest forecasts point toward milder temperatures next week, all eyes are on the impressively cold pattern expected to hit in the first week of March.

Buyers are reacting to colder trends forecast for March 6-9. Additionally, there are signs of the cold weather returning March 8-11.

On Thursday, the Energy Information Administration (EIA) reported that domestic supplies of natural gas fell by 177 billion cubic feet for the week ended February 15. That was bigger than the 164 billion cubic feet decline forecast by analysts.

For the week, April natural gas settled at $2.739, up $0.129 or +4.94%.