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The fiscal stimulus announced today at the National People’s Congress in China failed to make much of a splash in metals markets. Nevertheless, we think it will underpin stronger iron ore demand this year . Although infrastructure spending will be a key …
22nd May 2020
Profitability and production at US shale firms has slumped owing to low oil prices We expect US oil output to remain low throughout the rest of 2020 … … but it could start to bounce back in 2021 Since the outbreak of the coronavirus, oil demand has …
21st May 2020
Stocks fall, but outlook remains bleak Last week, US commercial crude stocks fell for the second week running. Digging deeper, though, reveals that the rebound in gasoline demand – which has so far underpinned much of the growing market optimism – …
20th May 2020
Significant output cuts still look unlikely Global aluminium output growth slowed further in April. However, with demand in China now picking up as its economy emerges from lockdown, the possibility of substantial output declines there appears slim. …
The silver price has historically been influenced by industrial metals and gold prices As a safe haven, silver has disappointed relative to gold Going forward, we expect the silver price to underperform gold through to end-2020 Silver is often described …
18th May 2020
In recent weeks, all three major natural gas benchmarks have traded at more-or-less the same price. Rather than a structural shift in the market, we think this probably reflects regional prices simply collapsing in unison amid the virus-related collapse …
This week has provided further tentative signs of a revival in commodities demand . China’s industrial production bounced back in April and weekly data in the US suggest that the pick-up in gasoline demand is gathering pace (although it remains very low …
15th May 2020
More promising signs for the US oil market US commercial crude stocks unexpectedly fell last week, adding to growing evidence that the US oil market has passed the worst. That said, a sustained recovery is not on the cards for some time yet. Indeed, the …
13th May 2020
While we generally agree with the USDA’s latest projections for 2019/20, we suspect that they are being too optimistic on agricultural supply in 2020/21. Nevertheless, we expect a pick-up in corn output will shift the market into a surplus, which will …
A last hurrah for OPEC output OPEC production jumped up in April, but this will prove a one-off given the agreed output cuts from May onwards. We expect OPEC compliance with the cuts to be fairly good in the coming months as prevailing low prices and …
Low oil prices, OPEC+ production cuts and delays to investment should reduce global oil supply by over 6% this year. This is one reason why we expect prices to end the year higher . By way of background, global oil production rose to 100.5m bpd in 2019 …
11th May 2020
Industrial commodities prices posted strong gains this week on the back of signs of a relaxation of quarantine measures in Europe and the US, which fuelled hopes that demand would recover soon. However, we maintain that most markets are still …
7th May 2020
China’s commodity imports have held up well so far this year, but weak external orders and subdued domestic demand point to lower volumes in the months to come . China’s exports rebounded strongly in April, rising by 3.5% y/y in US dollar terms (see our …
Slight reprieve for stricken US oil market Although US crude stocks climbed again last week, there are promising signs that the stress in the US oil market is beginning to ease. That said, a material turnaround in conditions remains some way off . The …
6th May 2020
The virus-led increase in exchange stocks is reminiscent of the GFC But changes in warehouse economics will keep a lid on stocks Nonetheless, we expect stocks to rise and remain high for some time In this Metals Watch , we take a closer look at whether …
Overview – The prices of most commodities struggled in April against a backdrop of moribund global demand. That said, the performance of energy commodities was mixed: while Brent crude and Henry Hub gas rose in price, the other energy commodities fell. We …
5th May 2020
Despite a raft of terrible economic data, industrial commodity prices ended the week broadly flat, except for oil prices which rose sharply. Attention is turning to the potential relaxation of containment measures, as several countries “pass the peak” of …
1st May 2020
The partial recovery in the S&P 500 suggests a return of investor risk appetite. But commodity indices have plumbed new lows. We think a couple of points are worth making about this apparent inconsistency, the most important of which is that it is largely …
Investment demand likely to dwindle While a surge in ETF inflows offset weak physical demand in Q1, we don’t expect this to be repeated over the coming quarters. After all, many of the factors that have boosted the investment appeal of gold are likely to …
30th April 2020
Next week, the Texas Railroad Commission could mandate measures to curb oil production in Texas for the first time since the 1970s. However, even if they do decide to curtail output, we think that the impact on oil prices will be minimal, in part because …
China’s official and unofficial PMIs dipped in April, almost entirely owing to weak export orders. A strong performance by the construction sector provides some relief for industrial metals prices, but there was little in the data to give much of a boost …
Builds in US commercial crude stocks to continue to slow US crude stocks rose again last week, but the pace of the builds is showing more signs of slowing. We expect stocks to continue to increase until the coronavirus-related quarantine measures are …
29th April 2020
The incentives offered by China’s provincial governments will artificially boost demand for base metals, especially lead and zinc. As a result, smelters who may have cut supply or shut altogether may instead maintain or even increase output, which will …
Overview – The global spread of the coronavirus has dealt an extraordinary blow to energy demand, and – for as long as the containment measures remain in place – it is hard to see much upside for prices. However, once the lockdown measures are eased, the …
28th April 2020
India’s gold imports to test historic lows Imports of gold into China and India continued to contract at a double-digit pace in March. But the plunge in physical demand has had little impact on the gold price, as it has been outweighed by strong …
27th April 2020
Overview – Measures designed to contain the spread of coronavirus have dealt a heavy blow to metals demand. Assuming that these measures are lifted at a global level in the second half of the year, we expect a small pick-up in industrial metals prices by …
Well-placed fears that the world is fast running out of storage for crude buffeted oil prices this week . On an extraordinary day of trading, the spot price of WTI fell deep into negative territory on Monday – closing at -$38 per barrel – for the first …
24th April 2020
OPEC’s allies recently agreed to cut output from May. While compliance with quotas is usually sub-par, we think that adherence to the quotas will be greater this time, in part because oil prices are so low . Earlier this month, OPEC+ agreed to cut oil …
Overview – At the time of writing, economic activity has ground to a halt around the world owing to virus containment measures. For the most part, commodities prices have plunged given the collapse in demand. We think a gradual revival in economic …
2020 contraction now firmly on the cards Global steel output declined in March in year-on-year terms. And all the signs suggest that worse is yet to come. As we had previously argued, the first global contraction in steel production for five years is now …
22nd April 2020
Mounting stocks come as little surprise US crude stocks jumped again last week, despite a small fall in production and a hefty drop in imports . Stocks are likely to continue to climb until the lockdowns are lifted, but the pace of increase may slow . The …
The spot price of WTI turned negative yesterday in large part owing to the nature of trading in the futures market. That said, the price slump has some fundamental underpinning as demand is very weak. We expect that storage constraints will keep the price …
21st April 2020
Vale, the world’s second largest iron ore producer, has cut its iron ore output guidance for 2020 by nearly 30m tonnes. Although significant, we don’t think it will be enough to push the market into a deficit. Therefore, we are sticking with our forecast …
20th April 2020
Output growth slows, but not by enough Aluminium output growth slowed last month. But with demand for aluminium collapsing, nothing short of a huge contraction in output will do enough to prevent stocks from piling up. Such a fall in supply still seems a …
The gold price has benefitted lately from demand for “safe” assets and an apparent easing of deflationary fears. While we also doubt that an extended period of de flation is on the cards, runaway in flation seems just as unlikely. And unless news on the …
17th April 2020
News of a record 9.7m bpd cut to output by OPEC and its allies failed to prop up oil prices, which fell again this week. As long as virus-containment measures continue to depress demand, we expect oil prices to remain low . By contrast, signs that …
The collapse in oil prices in recent months has incentivised governments to increase their strategic petroleum reserves (SPRs). However, we don’t think that it will provide a boost to prices . SPRs are used to mitigate against oil supply disruption. …
OPEC output surge will not last beyond May OPEC production surged in March after talks between OPEC and its allies broke down. While we expect output to remain relatively high in April, OPEC production should be much lower from May onwards following last …
16th April 2020
It is now crystal clear that virus containment measures will deal an unrivalled blow to metals demand. But the extent to which these same measures may also hit supply is up for debate. Despite all the headlines, there is currently little evidence of a …
Crude stocks surge as refinery activity plummets to 12-year low US crude and product stocks soared again last week as the virus-related disruption continued to weigh on demand. We expect crude stocks to rise further in the coming weeks, but the recent …
15th April 2020
The unprecedented 9.7m bpd output cut announced by OPEC+ will merely reduce the oversupply of oil in the second quarter. But assuming full compliance, and an involuntary drop in North American production, the market could fall into a deficit later in the …
14th April 2020
After collapsing in January and February, China’s commodity exports stabilised last month. But with economic activity outside China now in the doldrums, this is unlikely to last. Meanwhile, China’s imports of crude oil and copper remained reasonably …
The latest trade data show sharp contractions in gold imports by major consumers China and India, suggesting that gold jewellery demand has taken a battering. Until signs emerge that the spread of COVID-19 is easing, we expect jewellery demand for gold to …
9th April 2020
Despite the apparent conviction of US President Trump, much uncertainty remains over whether Saudi Arabia and Russia will manage to strike a deal in today’s OPEC+ meeting. Our best guess is that the two sides will agree to an output cut of around 10-15m …
There is huge uncertainty about the outcome of Thursday’s OPEC+ meeting. For what it’s worth, we suspect that a large and unconditional output cut is unlikely. Even if we are wrong, we think a sizeable output cut would merely put a floor under prices …
8th April 2020
Gasoline stocks likely to remain high The latest US weekly data clearly showed the negative impact on oil demand of measures to contain the coronavirus. Further stock builds are likely in the near term, despite falling domestic production . The EIA’s …
Export restrictions and stockpiling associated with the coronavirus may continue to support the price of Thai rice for the next few months. However, we expect that prices will fall back by the end of this year as the virus containment measures are lifted …
Iron ore prices have been supported so far this year by China’s steel mills, which have continued to churn out metal. But with demand in China still subdued, and the virus-related disruption yet to peak elsewhere, much of this steel is being stockpiled. …
Natural gas prices have reached historic lows in recent weeks, with US natural gas (Henry Hub) last week plumbing depths not seen since 1995. The near-term outlook for natural gas is bleak, but prices are likely to pick up in the second half of the year …
7th April 2020
Overview – Despite the prospect of a massive Saudi Arabian-led production cut, the price of oil has remained low in recent weeks amid a coronavirus-related collapse in demand. By contrast, coal and natural gas prices fared relatively better. This was due …
6th April 2020
