June And July Commodity Seasonality Stats

|
Includes: AGQ, BAR, BNO, CANE, CEF, DBO, DBP, DBRT, DBS, DEUR, DGL, DGLD, DGP, DGZ, DJPY, DNO, DRR, DSLV, DTO, DWT, DZZ, ERO, EUFX, EUO, FXE, FXY, GHS, GLD, GLDI, GLDW, GLL, GLTR, IAU, IAUF, JJCB, JJP, JO, JYN, NIB, OIL, OILD, OILK, OILU, OILX, OLEM, OLO, OUNZ, PALL, PGM, PHYS, PLTM, PPLT, PSLV, PTM, QGLDX, SCO, SGG, SGOL, SHNY, SIVR, SLV, SLVO, SOYB, SPPP, SZO, UBG, UBRT, UCO, UEUR, UGL, UGLD, UJPY, ULE, URR, USAI, USL, USLV, USO, USOD, USOI, USOU, USV, UWT, WEAT, WTID, WTIU, YCL, YCS, ZSL
by: Movement Capital
Summary

Energies: Heating oil, natural gas, and WTI crude are all past their seasonally strongest parts of the year. The WTI futures curve is in backwardation.

Financials: Late summer has historically been seasonally strong for the US 30-year Treasury bond and JPY/USD. The S&P 500 is trading close to its 20-year seasonal average for mid-June.

Grains: Contango has decreased in corn and wheat futures since last summer, June has historically been quite weak in rice futures.

Metals:July has historically been a positive month for copper and silver, gold seasonals turn in August, palladium is in backwardation.

Softs:Contango in cocoa futures has increased, lumber is up 40% in 2018, and June and July have historically been seasonally positive months for sugar.

This is my weekly update that covers seasonal trends and the term structure of futures contracts. All of the below data and graphs come from my Commodity Seasonality website. The website is completely free, and I use Seeking Alpha as my sole outlet for weekly recap articles. I break down the updates by asset class, so let's get started.

Energy Futures Seasonality

Heating oil (NYSEARCA:UHN) tends to have a strong first half of the year. The last half has historically been weaker, particularly in October and November.

August is the last month of the year with average monthly positive performance. I should point out that all of my seasonality data is for a front-month position rolled based on open interest.

Natural gas (NYSEARCA:UNG) seasonality gets ugly after June. The seasonal averages slope down over time since the front part of the natural gas has typically been in contango, making it expensive to roll long exposure. Contango is when contracts further out in time are priced higher than contracts closer to expiration. Backwardation tends to benefit traders with long exposure, while contango tends to detract from returns. Most people are familiar with the concept of contango in VIX futures, where VIX futures further out in time are typically priced higher than the front-month contract. The same concept applies here.

Positive WTI (NYSEARCA:USO) seasonality typically peaks in June.

And here’s a monthly view of the 20-year seasonality data.

The WTI futures curve is still in backwardation and roll-adjusted 12-month momentum is +43%.

Financial Futures Seasonality

August stands out as a historically strong month for the US 30-year Treasury bond (NYSEARCA:TLT).

Like most risk-off assets, the 30-year bond tends to catch a bid in the late summer months.

EUR/USD (NYSEARCA:FXE) positive 12-month momentum of ~20% has historically marked turning points in the currency pair, and the most recent occurrence is seemingly sticking to that template.

Here’s monthly JPY/USD (NYSE:FXY) seasonality. As you’ll notice, it’s quite similar to seasonality for the US 30-year Treasury bond.

The S&P 500 (NYSEARCA:SPY) is right in line with its historical 20-year seasonal average for this time of year.

The October – December period has typically been a seasonally strong period for the S&P 500.

Grain Futures Seasonality

Contango has decreased in corn (NYSEARCA:CORN) futures since last summer.

Oats in 2018 have tracked historical seasonality quite well. Mid-June has typically been a strong period for the agricultural commodity.

June has historically had the lowest average monthly performance in rice futures.

Soybean oil is trailing its already weak seasonal trends.

12-month momentum is positive in wheat (NYSEARCA:WEAT) futures.

Metal Futures Seasonality

Copper (NYSEARCA:JJCB) is having a very strong June. July has historically had the highest average monthly performance over the past two decades.

Gold (NYSEARCA:BAR) seasonals tend to turn in August, like JPY/USD and the 30-year US Treasury bond.

The palladium (NYSEARCA:PALL) futures curve is in a mild degree of backwardation. It’s the only precious metal with a backwardated curve.

Platinum (NYSEARCA:PLTM), like palladium and copper, has historically had very strong positive seasonality in January and February.

Silver (NYSEARCA:SLV) seasonality in July has historically been positive.

Soft Commodities Seasonality

Contango is creeping back into the cocoa (NYSEARCA:NIB) curve.

The seasonal outlook for coffee (NYSEARCA:BJO) isn’t too bright. The front part of the coffee futures curve, like wheat, is typically in contango.

Lumber is one of the best-performing commodities year-to-date. July through September has historically been a weak period.

June has historically been an inflection point for sugar (NYSEARCA:SGGB) futures.

And here’s a monthly view of the data. June and July have had the highest average monthly performance over the past twenty years.

Commodity Seasonality Conclusion

That wraps up coverage of individual contracts. I'll close with my most important charts.

First, let's look at the 20-year average monthly performance numbers for the month of June. The best-performing contracts have historically been oats, sugar, and cocoa. All three are soft commodities. The worst-performing contracts have historically been palladium, silver, and rice.

Here's a snapshot of the current amount of contango or backwardation for each contract I track. I compare the front-month contract with the second-month contract, rolling both before the first notice date for the front-month contract. Rice, lumber, and natural gas futures curves are in the highest amount of backwardation. Sugar, wheat, and corn are in the highest amount of contango.

Below are the 12-month roll-adjusted momentum numbers for each contract. Lumber, heating oil, and WTI crude oil have been the top-performing contracts. Sugar, coffee, and the US 30-year Treasury bond futures have been the three weakest contracts.

I hope you've found this article to be useful. It's meant to cut down on your research time and save you some money. Be sure to follow me for my seasonality updates on Seeking Alpha.

Let me know if you have any questions in the comments below, I’m happy to help out.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article should not be construed by any consumer as personalized investment advice over the internet. This article does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked in this article or incorporated herein. GraniteShares sponsors the free Commodity Seasonality website but in no way paid for this article. This article and information are provided for guidance and information purposes only. Investments involve risks and are not guaranteed. All information provided in this article should not be reproduced, copied, redistributed, transferred, or sold without the prior written consent of the author.