Filtered by Subscriptions: Commodities Use setting Commodities
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
As growing numbers of car companies idle production in response to COVID-19, we suspect that platinum group metals (PGM) demand will slow to a crawl. What’s more, job losses and income cuts due to lockdowns will curb car sales long after containment …
The price of Brent crude surged by 30% this week after President Trump suggested that Saudi Arabia and Russia were close to agreeing an eye-watering 15m bpd output cut to combat COVID-19’s hit to global oil demand. We suspect markets may have …
3rd April 2020
Oil prices have surged by about 30% in recent days after President Trump said that a deal between Russia and Saudi Arabia to jointly cut oil production would come in a “few days”. We are sceptical that a deal will be agreed and, even if it is, we don’t …
Industrial metals prices plummeted in March. (See Chart 1.) And with the virus-related disruption outside of China yet to peak, we suspect that prices will fall further over the coming months. Even if containment measures are eased from the second half of …
2nd April 2020
Overview – Oil prices plummeted in March under the weight of a collapse in demand and pledges from OPEC+ members to significantly raise output. Most other commodity prices also fell last month as the COVID-19 virus spread from Asia to Europe and the US. …
1st April 2020
Although China’s official and unofficial PMIs improved in March, the underlying picture is that the economy remains weak and is unlikely to offer much support to commodity prices . The Caixin manufacturing PMI jumped from 40.3 in February to 50.1 in March …
The latest leg-down in oil prices is not so surprising given that demand is collapsing at a time of rising supply. We think oil prices will only pick up if, as we expect, economic activity revives later this year . Oil prices slumped again in early …
30th March 2020
We have developed a new in-house measure of the “fundamental” copper price It suggests that copper was trading at a premium relative to its fundamentals in January And despite the plunge in its price, the premium is likely to have risen since then In this …
Commodity prices are still highly volatile, but they have remained in the doldrums this week despite the rally in other risky assets, notably equities. We have argued for some time that until the virus-containment measures are lifted, looser monetary and …
27th March 2020
The coronavirus is disrupting global economic activity by much more than we had previously thought. As a result, we now expect global oil demand to fall by 6.5% in 2020 to just under 94m bpd . Measures to contain the coronavirus have reduced global oil …
We think there will be some permanent loss of commodity consumption in 2020 owing to virus-related disruption to activity, but we do see prices picking up later this year as economic growth starts to revive . Few would dispute that measures to contain the …
26th March 2020
Refinery throughput to collapse and lift crude stocks US crude stocks rose a touch last week. We expect bigger increases in the coming weeks given that refineries have announced plans to curb output in response to the virus-related slump in product demand …
25th March 2020
Several producers outside China have reduced operations in the past week, most notably in Latin America. But much like policy support, lower supply will do little to boost prices so long as measures to contain the coronavirus keep demand comatose. In any …
Stockpiling and labour shortages associated with the coronavirus have supported the prices of some agricultural commodities, particularly the grains, in recent weeks. However, once the virus-related containment measures are lifted, we think that their …
Fire sales of gold have seemingly given way to safe-haven buying following yesterday’s unprecedented intervention by the Federal Reserve. Providing the Fed has injected sufficient liquidity to defend against a further collapse in equity prices, we expect …
24th March 2020
While the price of Brent has dropped by nearly 60% since January, agricultural prices have so far held up comparatively well. Although we wouldn’t rule out agricultural prices falling further, the recent divergence in prices reveals that the relationship …
2020 contraction still looks likely Global steel output was reasonably resilient in February. But that follows substantial downward revisions to the January figures. And while policy support – particularly in China – may boost steel production later this …
23rd March 2020
Over the last month, industrial metals prices had been holding up on hopes that China’s economy was edging closer to a post-virus recovery. But that all changed this week. With what were once downside risks now morphing into our central scenario, we have …
20th March 2020
Industrial commodity prices slumped this week amid virus-related economic disruption in the US and Europe and rising concerns about a deeper economic downturn in Asia, particularly China. Meanwhile, governments and central banks have continued to roll out …
Earlier this week, the virus-related economic disruption and the prospect of a surge in OPEC+ supply pushed the Brent-WTI price spread near to zero. Although it has since rebounded, we think the spread will disappear by the end of this year. And by 2021, …
Rising supply to exacerbate stocks glut Despite alarm bells ringing for global aluminium demand, output growth continued to gather pace in February. This will only have added to the piles of unwanted inventory and is another reason to expect that, once …
