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US oil production has been surprisingly resilient since oil prices collapsed in 2014 as companies have slashed costs and jobs and concentrated on only the most productive sweet spots. In this Energy Watch we examine how US shale oil producers have managed …
4th February 2016
The prices of industrial metals fell further in early January, unsettled by a renewed collapse in the crude oil price and by uncertainty surrounding exchange rate policy in China. However, sentiment revived later in the month as oil prices rebounded (on …
The S&P GSCI Agriculture index has started the new year where it left the last: down, falling by close to 1%. However, the beginning of 2016 has seen a divergence in the performance of the prices of the different sub-categories of agricultural …
Precious metals’ performances continued to diverge in January. The prices of gold and silver rallied on the back of safe-haven demand following the recent turmoil in global equity markets. In contrast, high stocks and fears of a slowdown in demand for …
3rd February 2016
The further gains in the price of gold today (to a high of $1,140 per ounce) are consistent with the relatively positive view we have had on the precious metal for some time. However, we are in no hurry to revise our existing end-2016 forecast of $1,250, …
Stocks of both crude oil and gasoline jumped again last week, primarily due to an increase in imports of crude and weak demand for products respectively. However, the weather probably bears at least some responsibility for last week’s stock builds. … US …
The release of the USDA’s winter wheat seeding report, the agency’s first estimate of US winter wheat acreage, points to the possibility of a fall in production this year, not just for winter wheat, but also the overall US wheat harvest. Moreover, the cut …
2nd February 2016
Russian ministers are set to meet on Wednesday to decide whether or not to remove the wheat export tax. We think the removal of the tax would put more downward pressure on wheat prices, although the full effect might not be felt for a few months and may …
It was a poor start to the year for commodities with the prices of energy, industrial metals and agricultural commodities all falling owing to persistent concerns about Chinese demand and continued oversupply, especially of oil. Indeed, the Bloomberg …
1st February 2016
Despite the rally in the oil market at the end of January, the big picture over the last few months has of course been one of further sharp falls in the prices of most industrial commodities. What's more, the positive note for oil may yet prove to be a …
This week’s big story has, of course, been the rebound in oil prices (to nearly $35pb) on unconfirmed reports that Russia and OPEC may finally be willing to agree coordinated cuts in output. We are sceptical that anything tangible will come of this, but …
29th January 2016
While the response to India’s Gold Monetisation Scheme has been fairly muted so far, the Sovereign Gold Bond Scheme has been a success, having attracted the equivalent of almost four tonnes of gold demand in less than three months. Going forward, we think …
In December, China’s rare earth (REE) exports were up by nearly 50% m/m – much higher than the 10% m/m average growth seen since the start of 2012. We believe the sharp increase was partly seasonal, as a number of firms probably brought forward orders …
The jump in oil prices today (to a high of $35) on speculation that Saudi Arabia and Russia could soon agree to cut output is at least consistent with our forecasts of a rebound by year-end. Nonetheless, we remain sceptical that anything tangible will …
28th January 2016
US crude oil stocks rose to a record level last week, driven by another drop in refinery inputs. What’s more, despite lower refinery production, there was another large jump in gasoline stocks. However, demand for oil products rose substantially. … US …
27th January 2016
Recent reports suggest that the Chinese government will stop supporting domestic corn producers and let the market determine prices. If implemented, this could put further downward pressure on global prices, as China’s import demand for corn ebbs in …
There are a number of risks which could cause oil prices to slump to as low as $20 per barrel in the first half of this year. However, our central forecast is that the prices of Brent and WTI will stabilise around current levels of $30 over the next few …
26th January 2016
The detailed Chinese import data for December, released earlier today, suggest that the strength of demand for agriculturals continued to ease at the end of 2015. … Chinese import demand for ags slows at the end of …
China’s imports of palladium plunged in 2015 as stocks were drawn down, but a pick-up in car production suggests that demand should recover soon. Meanwhile, imports of platinum were up strongly on the year. … China’s imports suggest platinum back in …
Gold imports by China and India shot up in 2015, to the highest level since 2013. We expect demand from emerging markets to remain strong in 2016, helping to underpin our positive view on prices. … China and India’s gold imports …
December was the fourth consecutive month of strong Chinese metals imports. Although low prices have probably played a role, we think that robust consumption, driven by increased infrastructure stimulus spending, has been the primary driver of import …
World Steel Association (WSA) data for December show that global steel output fell in all major producing regions last month. Production was down by 2.8% in 2015 as a whole, with the pace of decline accelerating towards the end of the year. Indeed, global …
25th January 2016
The sharp drop in crude oil prices has led to markedly lower Asian liquefied natural gas (LNG) prices and poses a risk to the economic rationale of US LNG exports. That said, the flexibility of US contracts and lower LNG transport costs should ensure …
After another poor start, the prices of industrial commodities ended the week on the up. The main positives were hints of additional monetary policy support from the ECB and the absence of any more bad news from China (where the official Q4 GDP data …
22nd January 2016
We expect global coffee output to rise only slightly in 2015/16, leading to a drawdown in global stocks, which should result in stronger prices. Our forecast that the Brazilian real will remain weak will maintain the incentive for Brazil to export, …
After taking the gold medal for price gains in 2015, cocoa has quickly fallen off the podium. Supply risks could see the price rebound over the short term before ending the year lower. … Cocoa price still likely to end the year …
Negative sentiment towards commodities in general, high stocks, a warm start to winter in the US and renewed fears about the Chinese economy have all contributed to the downward pressure on the prices of energy commodities, with the prices of natural gas, …
News that Renault failed emission tests on some vehicles has weighed on the price of platinum over the past few days. However, we think that sentiment towards platinum is excessively negative at the moment and that demand should actually benefit from more …
US crude oil stocks rose last week, driven by a drop in refinery inputs. What’s more, despite lower refinery production, there was another large jump in gasoline stocks. However, demand for oil products rebounded sharply, offering a glimmer of hope. … …
21st January 2016
In recent weeks, the focus of has been on the supply of metals and whether producers will cut to rebalance the markets. But in the case of zinc, lower supply almost seems inevitable. As such, it will be demand that dictates the scale of the market deficit …
Saudi Arabia has been willing and able to weather an extended period of low oil prices in order to squeeze out higher cost producers in the US, while perhaps also gaining some satisfaction from the pain being inflicted on Iran and Russia. But with prices …
20th January 2016
A downturn in China’s equity market since the start of the year and concerns about the country’s economic growth prospects reignited turmoil in global markets and dragged commodity indices lower. In addition, the lifting of sanctions linked to Iran’s …
After a poor 2015 for agriculturals, with a number seeing double-digit price falls, 2016 has started on a weak footing. While less affected by the economic cycle than other commodities, agriculturals aren’t completely immune from a deterioration in …
Saudi Arabia has been willing and able to weather an extended period of low oil prices in order to squeeze out higher cost producers in the US, while perhaps also gaining some satisfaction from the pain being inflicted on Iran and Russia. But with …
The turmoil in global equity markets has weighed on the prices of the more industrial precious metals (PM) over the past month, with platinum and palladium recording the worst losses. In contrast, gold, and to some extent silver, have benefited from …
According to the International Aluminium Institute, global output grew by just over 1% y/y in December. Excluding China, output rose by nearly 2% y/y. … Global Aluminium Production (Dec. & …
We don’t expect China’s recently-announced aluminium stockpiling scheme to provide prices with anything more than a temporary boost. Indeed, depending on how the scheme is implemented, it could actually dampen the pace of market rebalancing, delaying any …
18th January 2016
OPEC production slipped in December, led by Saudi Arabia and Nigeria, but the group’s output is still near record highs. Even though demand is set to grow by over 1m bpd this year and non-OPEC supply should fall, bulging stocks and high production from …
Confirmation that Western sanctions linked to Iran’s nuclear programme are to be lifted might be expected to add to the downward pressure on oil prices, but there are three main reasons why the impact should be limited. (We also made these points earlier …
15th January 2016
Although we are broadly positive on the outlook for industrial metals prices in 2016, it is hard to find the upbeat narrative for nickel. Demand is weak and stocks are high. That said , we do expect the market to fall into deficit this year, which should …
Brent’s renewed slide below $30 per barrel today has led to another wave of speculation about how much further oil prices could fall. For some time our view has been that the near-term risks are skewed to the downside and that additional declines – …
Although expectations for the current 2015/16 Brazilian crop have been revised higher, smaller harvests elsewhere and a receding threat of Indian exports mean that we are maintaining our forecast that prices will rise through 2016, albeit only slowly. … …
Cost curves are a widely-used tool to determine the potential direction of commodities production and prices. Given the weakness in the latter over the last few years, cost curves are currently of particular interest in determining where the floor for …
14th January 2016
China’s imports of major commodities in volume terms rose in December. Of course, low prices probably encouraged some buying, but it also seems likely that policy support, including higher infrastructure spending, is feeding through into stronger domestic …
13th January 2016
There were few significant increases in stocks last year, despite reports of oversupply in most metals markets. Indeed, stocks of many metals could be drawn down swiftly if, as we expect, supply falls this year and demand picks up. … Stocks will not …
Cerium is the most abundant rare earth element (REE) and one of the most widely used. We expect the rise in cerium demand to outweigh increases in supply this year and next, putting some upward pressure on prices. But prices are still set to remain low …
The end of unusually warm winter weather in the US helps to explain the surge in natural gas prices since December. But we expect contracting supply, the start of LNG (liquefied natural gas) exports and the increased use of natural gas in electricity …
Precious metals’ performances diverged in December. Gold and silver prices were broadly flat despite the Fed hiking interest rates for the first time since 2006, while platinum and palladium recovered some of the losses from previous months. More …
Data released earlier today by Malaysia’s Palm Oil Board show that palm oil inventories declined in December for the first time since the middle of last year as production fell sharply again. … Malaysia Monthly Palm Oil Data …
11th January 2016
