Commodities were mixed yesterday as gold continued to trade heavy while crude oil futures bounced back after Wednesday’s pullback. The commodity ETF, DBC, rallied 0.49% on the day. WTI crude oil futures rallied 0.44% yesterday thanks to three bullish catalysts. First, oil rose in sympathy with gasoline futures thanks to the ongoing colonial pipeline outage that is not expected to come back online until next week (earlier estimates said operations would be back to normal today). Second, a BP refinery in Indiana is undergoing unexpected repairs, which is cutting capacity by upwards of 50% (bullish products and drawing oil higher as a result). Lastly, the rally in stocks supported a broad risk-on move that supported energy markets broadly.
Bottom line for oil, yesterday’s list of bullish catalysts should have been able to spur a more substantial rally, and the fact that WTI couldn’t even gain half of 1% is fairly bearish.
Putting the near-term fundamental catalysts aside (both the pipeline and refinery news) the outlook for the ener-gy market remains bearish as global supply levels are near record highs, production is stronger than expected (notably in the US), and demand growth is less than ear-lier expectations thanks to the weak global economic outlook. Looking ahead, once $43/barrel is violated, the next support level is $41.50.
Turning to the metals, gold pulled back another 0.62% yesterday as the rally in stocks and general risk-on mon-ey flows lowered the demand for safe-haven assets. Since the Brexit vote, gold has been bouncing in a broad range between $1300 and $1370/oz., and that trading-range is still very well intact. Looking ahead, we continue to see gold as an attractive buy on dips towards or below $1300, as the precious metal began to trend higher in Q2 while the real interest rate environment continues to support the long gold argument.