The Overall Fundamentals Precious Metals Gold's price continued to fluctuate around the 1600 mark, with disappointments of the US Fed and the ECB being the major drivers of the decline. Gold was the only metal in the complex that recorded weekly fall last week. But, I do expect the up-trend to continue.
Energy
Friday's rally has saved Crude Oil?prices from recording losses for a?2nd week running. Concerning front-month contracts, WTI Crude Oil?gained +1.41%,?Brent?Crude?finished +2.32%.
After a brief fall to contango in June, ICE Brent Crude?returned to backwardation in July and the spread has been widening in recent days. The Key reasons for the situation are sanctions on Iran and potential decline in supply of Forties (the available barrels of North Sea Forties blend Crude Oil, the largest component of benchmark Brent Crude?as a result of an export program in September).
Strength in Crude Oil prices was helped by the US' and its allies' sanctions on Iran's oil exports, the data shows that Iran's shipment has dropped -1.2M?BPD since the EU sanctions became effective on 1 July. This represents about?50% of the original output of the Middle East country.
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In coming months, the situation will likely tighten as the US intensified sanctions by penalizing foreign banks that handle transactions for National Iranian Oil Company (NIOC) or its subsidiary Naftiran Intertrade Company.
The US has now placed sanctions on China's Bank of Kunlun and Iraq's Elaf Islamic Bank.
Note:?the Bank of Kunlun is a regional bank in western Xinjiang province with 82% held by CNPC, this round of sanctions would further limit China's ability to buy Crude Oil from Iran.
The Brent Crude contract is based on 4 North Sea Crude Oils - Brent, Forties, Oseberg and Ekofisk.
While Forties is the largest stream and the most important Crude Oil for setting prices, its supply is expected to decline as Nexen (NYSE:PB)?has planned to close Buzzard for maintenance, the largest field with over 70% Crude Oil feed to Forties
Nymex Nat Gas price?fell on?Thursday due to the broad-based selloff in financial markets after the ECB's disappointment. The decline was also driven by the increase in supply of +28 bcf to 3 217 bcf in the US in the week ended 27 July. Stocks were +472 bcf higher than last year at this time and +407 bcf above the 5-year average of 2 810 bcf. While Nat Gas price will likely report losses for the?2nd?consecutive week, it has risen?more than +50% from the lowest point in April.?That is attributable to?the rally?for 2?Key reasons: Coal-to-Gas replacement and hot weather. In Q-1 of Y 2012, market fears that oversupply in Nat Gas would fill storage earlier than usual sent prices South. As a result, Nymex Nat Gas price plummeted to a 10 yr low in April. Selloff in Nat Gas prices has attracted demand from power generators with the power sector chose to run Nat Gas-fired plants instead of Coal-burning ones due to lower costs. This kind of demand for Nat Gas is highly dependent on low Nat Gas prices. Already some plants have already switched back to Coal with recent rally in Nat Gas prices.
Power consumption has also been support by hotter-than-normal weather in the US this Summer. This factor will continue to help in August and as long as the weather is "Hot enough", robust demand would sustain current price levels. However, as Winter comes, I believe price will falter and probably slip back to $2.00 range.
Source: http://www.ibtimes.com/articles/370473/20120805/gold-silver-oil-price-outlook.htm
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