Just like the stock market, the commodity sector ran into profit taking this past week. Following six consecutive weeks of gains the Bloomberg Commodity Index lost 1% with the main driver being the abrupt turnaround in the dollar. The Greenback received a bid, especially against the euro, after responding to a “line in the sand” comment from the European Central Bank when the EURUSD reached €1.20, the highest since May 2018.
Crude oil saw a long overdue expansion to the downside of the recent tight range after demand recovery concerns, the upcoming refinery maintenance season and the stronger dollar helped trigger some profit taking. Gold’s failure to reclaim $2,000/oz led to selling as the dollar suddenly strengthened and yields moved higher in response to better-than-expected US economic data. While gasoline demand has recovered, a glut of distillates such as diesel and jet fuel, both unavoidable products in the process of producing gasoline, saw ULSD Diesel drop to the bottom of this weeks leaderboard.
The agriculture sector rose again, albeit at a slower pace than the previous three weeks. Weather concerns, the overall weaker dollar, strong Chinese demand for key crops and the economic recovery following the Q1 collapse have all supported the sector. The top five commodities this past week all belonged to the agriculture sector with coffee out in front followed by soybeans and wheat.