Commodities Futures and Options Brokerage

Paragon Commentary

Futures File: Oil, Cattle & Palladium Higher

Oct 27, 2017

Oil and Fuel Prices Surge

Oil prices gushed to a seven-month high on Friday as the market absorbed a tighter supply outlook. Saudi leaders have indicated that OPEC and other nations will continue curtailing petroleum production, which should keep a lid on global supplies and keep prices elevated.

Meanwhile, rising American demand for gasoline and diesel fuel has cut into supplies which have been tightening for weeks.

These factors pushed oil futures near $54 per barrel for the first time since March. As oil climbs, fuel prices are coming along for the ride, with gasoline prices jumping 20 cents over the last month.


Investors Stampede into Cattle Market

Investment funds have been piling into the cattle market, which is driving futures into new highs. This move comes despite recent news from the USDA that cattle herds are swelling, which could lead to a backlog of beef next year.

For consumers, this action could lead to unwelcome high prices at the store, but investor demand is great news for cattle producers who are looking at fat profit margins at current levels. Higher cattle prices and cheap corn (a major input costs for beef producers) are a welcome relief after months of unprofitable prices.

To fully capture the current profitability, producers can pre-buy their corn needs and pre-sell the cattle they’ll take to slaughter next year, locking in the current values through futures contracts, which stood at $3.48 per bushel and $1.20 per pound, respectively, on Friday.


Auto Industry Charges Palladium Prices

Palladium prices topped $1000 an ounce for the first time in sixteen years as demand for the metal has been rising sharply.

Over 75% of the demand for palladium comes from the autocatalyst industry, where the metal is used to clean up emissions from gasoline vehicles. In recent years, demand has been rising as developing nations, especially China, are implementing more clean-air standards.

Palladium has more than doubled since early 2016, and got another big boost over the past few months as Hurricanes Harvey, Irma, and Maria damaged over a million vehicles in their wakes. This massive upheaval in the auto industry should spark a new wave of car-buying and demand for palladium-containing catalytic convertors.

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