Commodities Wrap 4 August: Oil Sinks 5 Percent Again as Palladium Jumps 8 Percent

By The Edge Research Team

Crude oil fell more than 5 percent for a second consecutive session on Tuesday 4 August while precious metals surged, led by an 8 percent jump in palladium and platinum, deepening the split running through the commodity complex. Brent settled at 79.34 dollars a barrel, down 5.29 percent, and West Texas Intermediate at 75.75 dollars, down 5.71 percent, per CNBC. The move extended the slide that began with the OPEC+ decision to raise September output, and it came alongside falling Treasury yields and a firmer bid for hard assets, a combination that on our reading points to money rotating out of the barrel and into the metals rather than a broad retreat from commodities.

The selling in energy was again comprehensive. Natural gas reversed Monday’s gain, dropping 3.52 percent to 2.683 dollars per million British thermal units, while RBOB gasoline fell 3.87 percent to 2.8519 dollars a gallon and heating oil, the relative outperformer, eased 2.84 percent to 3.7671 dollars, per CNBC. With Tuesday’s decline, Brent has given back roughly 10 percent over two sessions since the OPEC+ announcement, our calculation, wiping out most of July’s late-month gains.

Precious metals rose across the board, with the platinum-group metals far in front. Palladium jumped 8.19 percent to 1,359.50 dollars an ounce and platinum 8.04 percent to 1,757.10 dollars, while silver climbed 3.76 percent to 60.03 dollars and gold added 1.40 percent to 4,147.90 dollars, per CNBC. Copper firmed 1.64 percent to 6.648 dollars a pound. Silver’s outperformance pulled the gold-to-silver ratio down to about 69.1, our calculation, from roughly 70.4 on Monday.

Agriculture was mixed. Cocoa extended its run, adding 2.53 percent to 6,089 dollars a tonne after Monday’s 9.4 percent surge, and coffee rose 0.98 percent to 307.70 cents a pound, per CNBC. Sugar added 0.33 percent and cotton was unchanged, while the grains slipped, with soybeans down 1.15 percent, corn 1.16 percent, rough rice 1.16 percent and wheat 1.84 percent.

Across the wider markets, the United States Dollar Index was little changed at 99.919, while the euro traded at 1.1525 dollars and sterling at 1.3439, per CNBC. The dollar was quoted at 157.64 Japanese yen. Treasury yields fell across the curve, with the two-year down about 6 basis points to 4.196 percent and the ten-year down about 6 basis points to 4.629 percent. The CBOE Volatility Index rose 4.16 percent to 16.52, and Bitcoin added 0.72 percent to 64,349 dollars. The Egyptian pound held near 50.13 per dollar.

Why it matters: Two consecutive sessions of 5 percent declines in crude are a material repricing for the Gulf’s fiscal arithmetic. Brent below 80 dollars trims the export revenue outlook for Saudi Arabia, Kuwait, the United Arab Emirates and Oman, although Gulf budget frameworks are built on conservative reference prices and regional equity markets have so far traded through the move, with the UAE leading the Gulf higher on Tuesday. The other side of the ledger is supportive: falling Treasury yields lower the cost of dollar-linked borrowing across the region, the surge in precious metals lifts the mark-to-market value of regional central banks’ gold holdings, and cheaper oil eases the import bill for Egypt and Jordan. For Qatar, lagged oil-indexed gas contracts mean the pass-through is slower than the headline moves imply.

Outlook: The immediate question is where crude finds a floor after shedding roughly 10 percent in two sessions. On our reading, a move of this size with no fresh supply disruption behind it reflects the market absorbing the OPEC+ September increase, and the pace of the decline itself raises the odds of a technical bounce. The surge in the platinum-group metals bears watching for follow-through, as moves of 8 percent in a single session have often been partially retraced. The broader marker for the week remains the United States rates path into Friday’s July jobs report: a further leg lower in yields would cushion both gold and Gulf financing conditions, while the rise in the volatility index to above 16 suggests hedging demand is returning beneath the equity rally.

Data note: commodity levels are CNBC late-session snapshots on the day’s active contracts, not a single uniform exchange settlement, and the rate, currency and cryptocurrency figures are timestamp-sensitive.

Table Energy, 4 August, ranked by change:

Table Metals, 4 August, ranked by change:

Table Agriculture, 4 August, ranked by change:

Table Rates, currencies, volatility and crypto, 4 August:

Sources: CNBC.

Get Complimentary Insights

Follow us