Macro: Sandcastle economics
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A closer look at crude oil, silver and copper
Ole Hansen
Head of Commodity Strategy
Summary: Chart focus on WTI crude oil, silver and copper
The crude oil market already on the defensive following Tropical Storm Barry’s failure to inflict the feared damage, received a White House double punch yesterday. Comments from U.S. Secretary of State Mike Pompeo on Iran and Trump’s threat to impose additional tariffs on China helped sent crude oil down towards the lower end of the current $56.50 to $60.50 range on WTI crude oil.
A day after Iran’s foreign minister Javad Zarif struck a conciliatory tone in an interview with NBC News, Mike Pompeo said that Iran had signaled an openness to talk. While later toned down by Iran, it was Trump’s threat to impose additional tariffs on Chinese imports which did most of the price damage. The risk of additional obstacles to global growth returned the focus to worries about demand.
Later today at 14:30 GMT the EIA will release its Weekly Petroleum Status Report and if data from the American Petroleum Institute are repeated, we could see a significant jump in distillate stocks and a small reduction in crude oil stocks.
A day after Iran’s foreign minister Javad Zarif struck a conciliatory tone in an interview with NBC News, Mike Pompeo said that Iran had signaled an openness to talk. While later toned down by Iran, it was Trump’s threat to impose additional tariffs on Chinese imports which did most of the price damage. The risk of additional obstacles to global growth returned the focus to worries about demand.
Later today at 14:30 GMT the EIA will release its Weekly Petroleum Status Report and if data from the American Petroleum Institute are repeated, we could see a significant jump in distillate stocks and a small reduction in crude oil stocks.
Silver, the long-forgotten metal, broke higher yesterday after having completed a 50% retracement of the May to June rally. Tailwind from stronger China data on Monday leading to a general bid among industrial metals helped kickstart the move. With Trump’s renewed tariffs threat some of these metals have once again seen the wind being taken out of their sails. Silver, however, seems to have caught some fresh momentum which potentially could see it target $15.85/oz followed by $16.15/oz, the February highs. The speculative length, as per my weekly CoT update, is light and it may attract some switching from gold as the XAUXAG ratio trades back below 90 this Wednesday.
HG Copper's attempt to challenge key resistance at $2.75/lb has once fallen flat after Trump reboots tariff threats and the dollar drifts higher following yesterday’s stronger-than-expected US retail sales. We maintain a constructive view on copper above $2.60/lb with a challenging supply outlook helping to off-set current headline risks.
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