Bears Return to Natural Gas on News of Potential Thaw

Commodity markets finished mixed on Friday with gold, platinum and palladium continuing to strengthen while copper, crude oil and natural gas succumbed to selling pressure.

Natural Gas

Natural gas futures continued to slide on Friday in reaction to forecasts of moderating weather following the current Arctic blast. Traders also continued to react to Thursday’s government report that was a downside miss against consensus estimates calling for a 221 Bcf draw.

Despite this week’s sell-off, natural gas prices could rebound next week because of the possibility of a record draw for the week-ending January 5. Preliminary data indicates gas inventories may drop by more than 300 billion cubic feet for the week.

Copper

Copper prices retreated on Friday for the fourth day in five, showing signs of increasing selling pressure after December’s nearly month-long rally. Although global investors remain positive about the market, Chinese investors are being a little more cautious about playing the long side at current price levels.

Macquarie analyst Vivienne Lloyd said, “They’re cautious about infrastructure (investment), and the government’s direction (in general) there’s actually not a lot of visibility on (Beijing’s intentions at the moment.”

Bullish investors are watching labor news in Chile for possible supply issues. According to reports, unionized workers at Glencore Plc’s Lomas Bayas copper mine in Chile rejected a final contract offer and began government-facilitated mediation on Thursday to avoid a strike.

Gold

Gold closed slightly higher on Friday but spent the session inside the previous day’s range as investors mulled over the latest government jobs report. Gold prices retreated from a 3 ½ month high hit on Thursday as the dollar rose in the wake of U.S. non-farm payrolls data for December.

Despite the mixed trade on Friday, the precious metal closed higher for a fourth straight week for the first time since April. The market also built on last year’s 13 percent gain with a 1 percent gain to start the new year.

Palladium closed lower on Friday after hitting an all-time high the previous session. The market is being supported by rising demand for the autocatalyst metal that is expected to further tighten the market after years of deficit. The strong rally has also been supportive for platinum which hit a 3 ½ peak earlier in the week.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil settled lower on Friday. Worries over soaring U.S. production and weaker refined products demand weighed on prices. Political tensions in Iran continued to underpin the market as investors speculated on its possible negative impact on supply from the OPEC member.

In other news, U.S. energy companies this week cut oil rigs for the first week in three even though crude prices hovered near their highest level since the spring of 2015. Drillers cut 5 oil rigs in the week to January 5, bringing the total count down to 742, General Electric Co.’s Baker Hughes energy services firm said in its closely followed report on Friday.