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OPEC+’s reluctance to consider a more radical adjustment in its output policy this week raises the risk that production falls short of the group’s target this year . Admittedly, the group agreed to a further 400,000 bpd increase in output in March. But it …
4th February 2022
A Russian invasion of Ukraine or severe ratcheting up of sanctions would add as much as 2%-pts to inflation in DMs, particularly in Europe. Given the inflationary backdrop and hawkish signals from central banks, monetary policy could be tightened more …
Product demand could get stronger in near-term Product demand remains very strong for the time of the year and, if gasoline demand mounts a recovery once COVID-19 cases moderate, it could get even stronger. Although, we expect that slowing economic growth …
2nd February 2022
Overview – Energy prices will remain volatile for the next few months, but should fall back later this year as demand drops back and supply picks up. That said, the shortfall of supply over the last year or so means that energy stocks are now extremely …
1st February 2022
The latest PMI data out of China suggest that demand for commodities softened again in January. And with Chinese demand unlikely to bounce back meaningfully this year, we continue to expect sharp falls in industrial metals prices by year-end as …
31st January 2022
The US Fed announced at its meeting this week that it will “soon be appropriate” to raise interest rates and hinted that a hike was coming as soon as March . (See here .) The US dollar strengthened, with the DXY index hitting an 18-month high of over 97, …
28th January 2022
Overview – Soaring energy prices have given a renewed boost to industrial metals prices in recent months but, if we are right, and power costs ease back from April, we think prices will fall sharply later in 2022. After all, demand for metal from key …
27th January 2022
Tentative signs of a revival in gasoline demand The surge in oil demand included the first signs of a recovery in transport-related gasoline demand. Although, we doubt demand will remain this buoyant for too long as economic growth is set to slow . The …
26th January 2022
Overview – Supply shortages have directly pushed up the prices of energy commodities and have indirectly raised prices of other commodities by boosting production costs. We think this will remain the case for at least another few months. But as we move …
A Russian military invasion of Ukraine would adversely affect the euro-zone economy by further disrupting the market for energy, pushing up inflation and reducing households’ real incomes. However, any economic fallout would probably be fairly small and …
25th January 2022
Despite falls in the prices of most other risky assets, including equities, commodities held up well this week . The prices of equities and commodities tracked each other relatively closely throughout the pandemic, but they have diverged sharply since the …
21st January 2022
Despite power rationing, aluminium output grows in 2021 Although global aluminium output fell in y/y terms in December, it still grew strongly over 2021. The lifting of power restrictions in China has helped increase global output despite a reduction in …
20th January 2022
Oil prices have risen sharply since the start of 2022 and natural gas and coal prices have remained high. We continue to expect energy prices to fall this year, but the latest developments on supply suggest that they will not fall by quite as much as we …
19th January 2022
OPEC under-production likely to continue OPEC continued to raise output by less than its target in December. However, the group is still steadily raising output, which is a key reason why we see the market moving into a surplus this year . The OPEC …
18th January 2022
The deadlocked end to talks between Russia, the US and NATO and subsequent hawkish noises from Russian officials have caused a risk premium to emerge on Russian asset prices and will keep the prospect of tighter Western sanctions on the table. The …
14th January 2022
Most commodity prices increased this week, with coal prices leading the pack on the back of Indonesia’s ban on coal exports this month. That said, we don’t see commodity prices rising for much longer . Indeed, Chinese imports of most raw materials fell …
After a stellar run in 2020-21, we expect the prices of most commodities to ease back this year as economic activity slows, notably in China, and supply bottlenecks start to ease . The macro-economic backdrop for commodities will deteriorate in 2022 . As …
13th January 2022
While high power prices and low stocks will support prices in the near term, we think that prices will pull back in the second half of 2022 as Chinese economic activity slows further and supply improves . With the exception of iron ore, the prices of most …
US oil demand improves, but will remain under pressure Commercial crude stocks slumped last week, reflecting a partial recovery in demand. However, we think demand will remain under pressure as COVID-19 cases rise in the US and as economic growth slows. …
12th January 2022
We see energy prices broadly falling this year as slower global economic growth should cool demand growth, but low stocks of many fuels mean prices will remain historically high and volatile for some time . At the start of last year, we forecast that the …
11th January 2022
Overview – Two themes have dominated commodity markets at the turn of the year: the ongoing shortage of energy commodities and the global rise in cases of COVID-19. On the former, we think that shortages will start to ease meaningfully later this year, …
7th January 2022
The experience of South Africa (see here ) with the Omicron variant seems to have allayed investors’ fears over commodity demand. Indeed, the net long position held by investors in the oil futures market has begun to rise, indicating an improvement in …
Omicron to weigh on demand for a few weeks yet Commercial crude oil stocks fell, but this reflected solid demand from refineries. Implied product demand – particularly for gasoline – slumped, suggesting that the public were cautious about travel in the …
5th January 2022
The December PMI data for China point to a healthy pick-up in commodity demand. But this only partially reverses the declines from earlier in 2021, and the big picture remains that commodity demand in China is set to struggle this year as headwinds facing …
4th January 2022
Demand tempered, but is likely to hold up well for now Commercial crude oil stocks fell sharply last week for the fourth week in a row. That was despite demand for oil products dropping back in line with the seasonal average. Early indicators suggest …
22nd December 2021
Weak steel demand will weigh on China’s steel output for some months yet Global steel production contracted in y/y terms in November, mainly owing to depressed output in China. Although China’s power rationing came to an end last month, there are no signs …
We always expected European natural gas prices to remain high over the winter because of low stocks, but heightened uncertainty about supply from Russia has caused prices to skyrocket again. Assuming supply isn’t affected, though, our expectation is that …
21st December 2021
Commodity supply shortages have been widespread over the last year or so There doesn’t appear to be a single cause of these shortages But a key theme is that prices are now close to a peak (if they haven’t peaked already) In this Commodities Watch , we …
Exchange stocks of base metals have fallen this year, as supply was interrupted by power rationing in China as well as the ongoing effects of COVID-19. However, now that power restrictions have been lifted, and with Chinese construction activity …
Output to bounce back in the months ahead, despite slipping in November Despite a y/y fall in global aluminium output in November, it is still up strongly year-to-date. And it is likely to rise again from here as power restrictions in China are lifted and …
20th December 2021
It was a week of central bank decisions, culminating in ‘Super-Thursday’. (See our Drop-In here .) The big picture is that central banks generally sounded more concerned about the rise in inflation , despite the ongoing spread of the Omicron variant. …
17th December 2021
Our estimates show a fall in the risk premium in the oil price since the emergence of the Omicron variant, as concerns over demand resurfaced. But the risk premium is still large, which adds weight to our view that oil prices will fall next year as the …
16th December 2021
Upcoming SPR releases could put a floor under commercial stocks Commercial crude oil stocks slumped last week as domestic demand strengthened and exports jumped. The decline in commercial stocks also came as strategic petroleum reserves fell. In the final …
15th December 2021
OPEC continues to over-promise on supply OPEC oil production increased in November, but once again by less than the group’s target. We think OPEC will continue to under-produce, but it should still account for a large share of the world’s oil production …
13th December 2021
We are sceptical that commodity demand growth in China is about to reignite, despite this week’s cut to the required reserve ratio (RRR) for most banks and data showing surprisingly strong imports of key commodities in November . After all, both …
10th December 2021
We doubt that the recent jump in China’s iron ore imports is indicative of increasing demand. In fact, we expect demand for iron ore in China to cool as construction activity continues to slow and the clampdown on excess steel production continues, both …
9th December 2021
US demand remains healthy, for now US commercial stocks remained range-bound, but there were sizeable additions to stocks of petroleum products. That said, implied product demand remains solid, despite rising new COVID-19 infections. Unless travel …
8th December 2021
Overview – Most commodity prices have fallen in the last week or so following the identification of Omicron – a new, and potentially more transmissible, strain of COVID-19. However, while commentary has generally focused on the effects that the new strain …
7th December 2021
The sharp rise in China’s commodity imports last month could be taken as a sign that underlying demand growth is undergoing a renewed acceleration. But given that this is just one month’s data, and that other indicators point to a further softening in …
Oil prices fell briefly on Thursday after OPEC+ decided to push ahead with its plan to raise oil output by 0.4m bpd a month, despite plunging oil prices since news of Omicron broke . Prices recovered shortly after, though, probably because OPEC+ left the …
3rd December 2021
Omicron will weigh on jet fuel demand in the next few months, but the wider hit to demand is still unclear. And although OPEC+ decided to push ahead with its planned oil production increases, we think it will struggle to raise output by as much as planned …
Cobalt prices have soared in 2021 to almost double the 2020 average price of $31,726 per tonne. We expect the growth in EV production and issues around supply to continue to push prices higher in 2022 . The cash price of LME cobalt raced to over $62,850 …
2nd December 2021
US demand still outstripping supply, despite falls US commercial stocks fell as, despite some chunky falls in product demand, US demand is still outstripping supply. Although, the release did shows signs that crude production might finally be responding …
1st December 2021
Taken together, China’s manufacturing PMIs point to somewhat stronger industrial activity in November, but this was almost entirely due to improved power supply last month rather than a pick-up in underlying demand. Accordingly, there was little to offer …
We were already downbeat on the outlook for most commodity prices in 2022, not least because we thought that prices had lost touch with demand fundamentals. The risk of Omicron-related effects on demand just adds weight to our view . The prices of most …
29th November 2021
Most commodity prices fell on Friday after South African scientists declared they had identified a new COVID-19 variant on Thursday which may be more transmissible. We think it’s still early days to say what this means for the global economy, but it has …
26th November 2021
The announcement of the co-ordinated release of oil reserves by the US and other large oil consumers should mean higher supply (and downward pressure on prices) but it will come at a time when we expect that the market will be in a surplus anyway. What’s …
25th November 2021
Some commentators have pointed to the slump in the Baltic Dry Index as a sign that shipping bottlenecks are easing. But we think it is more a symptom of lower Chinese steel output and plunging iron ore prices . The Baltic Dry Index (BDI) is a composite …
US demand still buoyant in the face of high prices US commercial stocks rose due to a pre-planned release of reserves and a large drop in exports. But the bigger picture is that product demand remains healthy, adding pressure to a tightening market . The …
24th November 2021
We have left our near-term forecasts for energy prices (which are historically high) unchanged after reflecting on the latest weather forecasts for the upcoming Northern Hemisphere winter. Temperatures are expected to be slightly higher than average over …
