Early last week, the market attention was mainly on the hung parliament formed after the Italy election. Sentiment was also damped by Moody’s downgrade of UK’s triple A credit rating. Later in the week, investors’ risk appetite improved after Italy’s bond auctions and ECB President Draghi’s Assurance that the central bank would not exit monetary easing soon. Another focus was the US sequester, i.e. about $85 billion in spending cuts, that began on March 1. Negotiation on Friday between Obama and congressional leaders failed to reach an agreement to avoid the reductions.
Crude Oil: Brent crude plunged last week with the front-month contract reverting back to the 110 level as geopolitical tensions eased for the time being. The P5+1 negotiation about Iran’s nuclear development was held last week in Almaty. While the meeting, the first time since last June in Moscow, has not made any deal yet, it is deemed to be a more constructive one as all parties agreed to hold a new round of talks in Turkey on March 17-18 March and then more high-level talks in Kazakhstan on April 5-6. Moreover at the meeting, the Western allies agreed to offer Iran limited sanctions relief if it stops its output of 20% enriched uranium. Iran stated that it would consider the offer. Yet, Tehran’s Interim Friday Prayers Leader Hojjatoleslam Kazem Seddiqi stressed that “any proposal which denies the people their rights is dismissed by the nation and no official has the right to compromise in this regard”.
Natural Gas: The DOE/EIA reported a -171 drop of gas storage to 2 229 bcf in the week ended February 22. Stocks were -307 bcf less than the same period last year and -308 bcf above the 5-year average of 1 921 bcf. Separately, Baker Hughes reported that the number of gas rigs fell -8 units to 420 in the week ended March 1. Oil rigs increased +4 units to 1 333 and miscellaneous rigs remained unchanged and the total number of rigs fell -4 units to 1 757. Directionally oriented combined oil, gas, and miscellaneous rigs slipped -12 units to 185 units while horizontal rigs added +1 unit to 1 141 units and vertical rigs added +7 units to 431 during the week.
Precious Metals: Despite a modest rebound earlier in the week, selloff resumed with the benchmark Comex gold contract losing -0.03% on weekly basis. In the complex, the decline in PGMs prices was more severe with platinum and palladium losing -2.11% and -2.03% respectively. South African government has proposed measures to allow more institutions to provide exposure to commodity ETFs, in particular gold and platinum.
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