Both supply and demand factors played a role in strengthening petroleum futures markets this week. With the effects of President Obama's moratorium on deep water drilling still unknown, some investors felt that tightening supply would be the inevitable result.
Still other investors saw rising equity markets as a sign that industrial demand was picking up across the globe. Stock markets were up more than 1% on the week in the U.S., Britain, Germany, Brazil, Japan, and Hong Kong. The weakening U.S. dollar helped petroleum markets to lock in their gains for the week. A falling U.S. dollar tends to provide strength to the petroleum markets, as they are denominated in U.S. dollars.
On the week, front month August crude futures were up $2.90 per barrel (+4%), August unleaded gas futures were up 10 cents per gallon (+5%), and August heating oil futures (also known as diesel fuel) were up 14 cents per gallon (+6%).
Gold Makes New High
Precious metals rocketed higher this week as investors worldwide sold their paper currencies in favor of gold, silver, platinum and palladium. In the upward swing, gold reached all-time highs on Friday morning at $1263 per ounce, up 3% on the week. Silver also climbed $1.04 per ounce to $19.27, a 6% gain.
In percentage terms, palladium was the biggest winner on the week, with the September contract rising $45 per ounce to $496 on Friday, an 11% gain. Palladium was especially strong due to rising auto sales, especially in China, the world's largest automobile market. Palladium (and platinum +$64/oz this week) prices follow auto sales, as both are essential components in catalytic convertors.
Soybeans Grind Uphill
Soybean prices rose ten cents per bushel (+1.1%), led higher by demand for soybean oil, which rose 1.24 cents per pound (+3.3%). Demand for American soybean oil was stronger this week due to Chinese buying and rising diesel prices.
China has recently been entangled in a trade war with Argentina (the world's largest soy oil exporter), which has forced Chinese buyers to look towards American producers for their bean oil needs. This week's rise in soybeans and soy products has been a welcome sign to producers, who have endured a $1.00 drop in soybean prices over the last month.