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Commodity prices plummeted yesterday in a knee-jerk reaction to the news of more US tariffs on Chinese goods. We have argued for some time that the US-China trade war was likely to escalate, and it has been a reason why we have been particularly bearish …
2nd August 2019
Gold demand to plateau over the rest of 2019 Central bank buying and ETF inflows underpinned robust demand for gold in the first half of 2019. While we think that strong official sector buying will continue, ETFs may start to see outflows as investors …
1st August 2019
In this Update we are launching our coverage of the European TTF natural gas price. In short, we think that surging global supply of liquefied natural gas will keep EU markets amply supplied over the next few years. As such, we expect only a modest rise …
China’s official and unofficial PMIs both rose in July, but they remain consistent with a renewed slowdown in economic activity, which will be a key factor weighing on commodity prices later this year . The official manufacturing PMI ticked up to 49.7 …
Overview – With the exception of the precious metals, most commodity prices drifted lower in July on concerns about soft demand. Given our forecast of slower global economic growth in the second half of this year, we expect the prices of most energy and …
31st July 2019
Despite the large draw, US oil demand is looking soft Another hefty drawdown in US commercial crude stocks last week might be taken as a bullish sign by oil markets. However, taking a closer look at the latest week’s figures, the picture painted of demand …
The ending of the Central Bank Gold Agreement signals that worries about central bank gold sales are firmly behind us. In fact, central bank buying is now a significant prop rather than a headwind to the gold market. Indeed, with significant European …
30th July 2019
Overview – Recent rallies in metals prices, particularly in precious metals and iron ore, are likely to falter sooner rather than later. Indeed, we expect almost all metals prices to drop in the remainder of this year as global growth slows and investor …
29th July 2019
Commodity prices have largely been treading water, ahead of some major events next week . The Fed will announce its interest rate decision on Wednesday. A 25 basis points rate cut is already priced into financial markets, but anything more could prompt a …
26th July 2019
Steel production growth starting to tumble Faltering demand from the Chinese construction sector should mean that the recent downturn in global steel output growth should gather pace in the months ahead . The World Steel Association reported that growth …
Overview – We continue to expect that sluggish growth in global oil consumption will be a factor weighing on oil prices in 2019. Nonetheless, OPEC+ output cuts and the sanctions-related drop in exports from Venezuela and Iran will put a floor under …
We think that the price of palm oil (PO) will rise a touch this year and pick up strongly in 2020 primarily on the back of stronger demand growth, which will shift the market into a deficit . By way of background, the price of PO has tumbled since the …
25th July 2019
Hurricane Barry still distorting the figures A fall in production in the Gulf of Mexico due to Hurricane Barry largely explains last week’s huge decline in US commercial crude stocks. However, although these output outages will only be temporary, we still …
24th July 2019
The latest rally in the Baltic Dry Index (BDI) has more to do with developments in the iron ore market than trends in world trade. As such, we think that the index will fall back as the iron ore trade normalises and the reality of slower global growth and …
The rise of speculative investment in base metals has resulted in high levels of overall price correlation. Beyond this, copper seems to provide a fairly reliable gauge of the general direction of base metals prices. But despite following similar trends, …
23rd July 2019
Weak Chinese production clouds an otherwise brighter picture Global aluminium output slumped in June, as a sharp fall in Chinese output outweighed increases elsewhere. But putting this month’s reading to one side, there are now clear signs that global …
22nd July 2019
Overview – Subdued economic growth will weigh on the prices of most industrial and energy commodities for the remainder of 2019. What’s more, our view that there will be a further escalation in the US-China trade war could have particularly negative …
19th July 2019
We now expect the Fed to start cutting interest rates at the end of this month . However, we only expect a quarter-point reduction in July and only one further cut this year. While lower US interest rates are typically good news for all commodities, there …
The price of palladium has surged amid higher demand for the metal from the Chinese auto sector, due to the ‘Blue Sky Protection Plan’, and investor buying. But our in-house demand proxy suggests the rally isn’t justified by underlying demand. As a …
Hurricane Barry clouds the picture Last week’s draw in commercial crude stocks can largely be put down to a drop in production in the Gulf of Mexico linked to Hurricane Barry, rather than stronger demand for crude. While the picture is blurred by the …
17th July 2019
Fed Chair Jerome Powell’s confirmation earlier this week that an interest rate cut is likely in July gave most commodity prices a lift . And oil prices rose to their highest level since May following a sharp decline in US crude stocks, rising geopolitical …
12th July 2019
China’s trade data for June painted a fairly downbeat picture of its demand for commodities. Given that we expect the Chinese economy to slow further over the coming months, a pick-up in China’s commodities imports looks unlikely . Continuing a run of …
We expect refined zinc output to grow at its fastest pace for nine years in 2019 and this, combined with ailing demand, suggests zinc prices should continue to fall to our end-2019 forecast of $2,300 per tonne . We have long been of the view that zinc …
A sharp drop in mortgage rates has boosted activity in the US housing market However, the outlook for lumber-intensive housing starts is not all that bright The latest rally in US lumber prices is therefore likely to unwind After falling sharply over the …
We think that the OPEC+ production cuts will fail to reduce global crude stocks. Instead, we expect soft demand growth and rising global supply, particularly from the US, to push stocks higher in the remainder of this year, which underpins our forecast of …
Mounting geopolitical tensions between the US and Iran have prompted fears of a full-blown military war in the Gulf region. The most important impact would clearly be the loss of life. From the perspective of the energy market, if war were to break out, …
11th July 2019
As demand fears have taken centre stage, persistently low exchange stocks have stayed under the radar. We think this is unlikely to change this year. But in 2020, looser monetary conditions and rising risk appetite could shift market attention to waning …
OPEC is downbeat on prospects for 2020 OPEC sees demand for its oil falling in 2020 as non-OPEC producers take market share owing to its policy of output restraint. It forecasts that growth in global demand will be unchanged next year, whereas we expect …
Philadelphia refinery shutdown seems to have had little effect on stocks Although the main cause of last week’s sharp fall in commercial crude oil stocks is not clear, it does seem that the recent shutdown of the Philadelphia Energy Solution’s refinery …
10th July 2019
We believe that the restarts at Alunorte, Becancour and in China will provide additional downward pressure on the price of aluminium. This, coupled with a weak demand backdrop, means that we expect aluminium prices to fall to a three-year low by end-2019 …
8th July 2019
Despite a swathe of news that should have been positive, commodity prices struggled to make gains this week as concerns about global growth continue to weigh on sentiment . Even the strong US employment data on Friday failed to lift the mood, although it …
5th July 2019
In the last month, a slew of events sparked gold’s strongest rally in nearly three years. We have not changed our long-held view that lacklustre global growth and a tumble in equity markets will keep gold prices elevated for the remainder of 2019. But we …
Oil & Gasoline – Oil prices rose a little in June on a combination of escalating US-Iran tensions, signs of a truce in the US-China trade war and the expectation that OPEC+ would extend its production cuts. However, prices have already eased back. In our …
4th July 2019
The key themes last month were a marked decline in expectations for global growth and a dash for safe-haven assets by investors. Even the recent easing of tensions in the US-China trade dispute has done little to perk markets up. That said, lower supply …
Overview – While June was a relatively positive month for commodity prices, we think that a combination of slower global growth and waning risk appetite will lead to lower prices for energy and industrial metals later in the year. Energy – Oil prices …
3rd July 2019
The jump in net imports is unlikely to continue A surge in net imports meant that commercial crude oil stocks fell by less-than-expected last week. We expect stocks to continue to drop in the weeks ahead in line with the seasonal uptick in gasoline demand …
OPEC+ has agreed to rollover its current output quotas for nine months, but weak demand means that we still expect the market to move into a surplus and oil prices to fall by end-2019 . To recap, OPEC and its allies, primarily Russia, today officially …
2nd July 2019
In theory, last weekend’s trade truce between the US and China is a positive for commodity prices . But the muted market reaction suggests some scepticism. We tend to agree. In fact, we suspect that any boost to demand will only be temporary, and that …
1st July 2019
Another month of weak PMI readings confirms a renewed slowdown in China’s economy. While optimism surrounding the US-China trade truce is currently buoying commodity prices, we think slower growth in Chinese demand will be a factor dragging prices lower …
Commodity markets have been relatively quiet ahead of the G20 meeting (this weekend) and OPEC meetings (Monday and Tuesday) . Investors are optimistic that a truce on trade will be agreed when President Trump meets President Xi at the G20. As such, if …
28th June 2019
Despite rising trade tensions and soft demand growth, we think that the price of copper will be resilient in the coming months and rally thereafter due to supply constraints . As we had anticipated, the LME copper price has dropped since mid-April due to …
We expect OPEC+ to reaffirm its current output quotas for another six months when it meets next week. The group is likely to justify the move by highlighting high stocks and subdued demand prospects, but the 18% plunge in prices between mid-May and early …
Hefty stock drawdowns are more about supply than demand We think last week’s unexpectedly large decline in US crude stocks can be explained more by the fall in OPEC production than by surging domestic demand. That said, we do not think that the latest …
26th June 2019
The turning point for Indian gold imports is looming Gold imports in India and China diverged in May, as temporary factors propped up consumer buying in the former, while demand in the latter remained sluggish. But we expect import demand for gold in both …
25th June 2019
Concerns about a shortfall in global oil supply have resurfaced as a result of the escalation in geopolitical tensions surrounding Iran. But we think there are four key reasons why the risk to supply is less now than back in 2011, when hostility between …
Having surged this week, the price of oil could rise further in the near term if tensions between Iran and the US continue to escalate. At the same time, the price of gold is benefitting from an increase in safe-haven demand and a weaker US dollar. The …
21st June 2019
Chinese steel rebar prices have been bolstered recently by surprisingly resilient construction activity, but we expect demand to falter in the coming months and prices to fall sharply. … The writing is on the wall for Chinese …
20th June 2019
Global aluminium production was unable to shake off its recent malaise in May. That said, lower input costs could offer some support to output this year. But regardless of any supply developments, our view remains that lacklustre demand will send …
After a recent run of large builds, last week’s drawdowns in US stocks of both commercial crude and gasoline point to an improvement in US oil demand. But with stocks still relatively high, we think OPEC+ is likely to rollover current production cuts at …
19th June 2019
There has been a renewed slump in the price of cobalt in recent months, owing in large part to a jump in supply. In this Metals Watch , we explore cobalt’s short-term supply and demand prospects and conclude that the cobalt market is likely to remain in a …
