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Sharp falls in the cost of drilling and fracking shale oil wells mean that some firms can now be profitable even when oil prices are extremely low. This should help to reduce the sharp declines in oil production from US shale wells and could even set the …
27th July 2015
Central banks have become major buyers of gold, accounting on average for about 10% of total gold demand over the past five years. The primary driver of central banks’ gold buying continues to be diversification away from the US dollar with some also …
Sentiment has soured dramatically in the past week with the prices of almost all commodities falling sharply. Ironically, many of the same commentators who continued to peddle the “supercycle” hypothesis long after prices began to weaken are now …
24th July 2015
Renewed strength of the US dollar over the past month and a deterioration in sentiment towards commodities in general as an asset class, have been headwinds for commodity prices. However, short-term supply concerns have tended to dominate agricultural …
Data on Asia’s Q2 cocoa grindings revealed a 12% y/y decline, the fourth consecutive y/y fall. This follows data released last week which showed continued weakness in North America and Europe. … Asia Cocoa Grindings …
Today’s weak PMI reading from China will reinforce the negative sentiment towards commodities, notably industrial commodities, but demand should still pick up on further policy easing. Meanwhile, slightly softer numbers from the euro-zone confirm it is …
Wet weather in the first half of July meant that the amount of sugar cane harvested in Brazil fell 37% compared to the second half of June. As a result, both sugar and ethanol production dropped sharply. … Brazil Sugar Production (1st-16th …
23rd July 2015
In an earlier Precious Metals Update , “Quantifying the downside – and upside – for gold” (13 th March), we suggested that the gold price could fall as low as $850 per ounce in a worst case scenario. We stand by that analysis. Nonetheless, our base case …
Despite slowing auto sales in China, we believe autocatalyst demand for platinum and palladium will increase by at least 3% in 2015, helping to underpin our positive view on the prices of both metals. While recent price weakness has prompted us to revise …
The recent deal between Iran and the Wes tmeans that it is now very likely that substantial volumes of oil from Iran will return to the market. (We note that although a final agreement is not guaranteed, it seems very probable.) In this Energy Watch , we …
The sharp rebound in the Baltic Dry Index (BDI) since the end of May has been seen by some as a harbinger of a more positive outlook for demand and prices of bulk commodities. However, we would argue that while the recent upward trend in the BDI might …
Broad-based weakness saw industrial commodity price indices slip between mid-June and mid-July. The S&P GSCI agriculture index bucked the trend, although it too has eased back recently. What’s more, the past month has highlighted the poor performance of …
22nd July 2015
World Steel Association (WSA) data for June show a 2.4% y/y decline in global steel output, with falls in most of the largest producers. … Global Steel Production (Jun. …
US crude stocks rose last week as another unseasonal increase in commercial inventories was complemented by an addition to the Strategic Petroleum Reserve. … US Weekly Petroleum Status …
Sentiment towards commodities as an asset class has rarely, if ever, been more negative. This is understandable given the persistent weakness of prices and the headwinds on both the demand and supply side. However, we believe that the mood is now …
China’s imports of agricultural commodities were generally strong in June, suggesting a pick up in underlying demand. However, opportunistic buying due to lower prices is likely to have been a factor. … China’s corn and wheat imports surge in …
21st July 2015
Prices may be plumbing new lows, but the detailed Chinese trade data are pointing to some positive trends in metal demand. In particular, the surge in nickel imports in June suggests that the domestic market is tightening. … China's refined nickel imports …
We think that sentiment towards gold is now excessively negative. Nonetheless, given the difficulty in valuing an asset that pays no income and the importance of safe-haven demand, which is also largely subjective, the current market mood cannot be …
20th July 2015
According to the International Aluminium Institute (IAI), global aluminium production slipped by less than 1% m/m in June, but still grew by over 10% y/y in the first half. However, output in the world ex-China fell by 2% on the month. … Global Aluminium …
Losers again outweighed winners this week. Oil dropped in anticipation of the easing of sanctions on Iran, although the near-term prospects for prices may depend more on sentiment towards China and the dollar. Wheat fell on more favourable weather …
17th July 2015
Today’s confirmation that China has added to its official holdings of gold since 2009 is not necessarily bullish for prices. This is buying that has already taken place and the increase was (arguably) less than might have been expected given the surge in …
The latest European and North American cocoa grinding data continue to point to subdued demand. Combined with a rebound in Ghanaian production, we think that the price of cocoa will fall this year. … Subdued demand will undermine cocoa …
Tin demand is expected to pick up after a weak start to this year, but the main case for higher tin prices lies in a tightening supply profile. We expect ore exports from Myanmar to slip in the second half of the year which, coupled with lower Indonesian …
16th July 2015
Over the past month, precious metal (PM) prices have slumped as the correction in equity prices in China damaged confidence in global commodity markets while investors shrugged off the threat that Greece might leave the euro-zone. Indeed, we recently …
US crude stocks began falling again last week, but the decline was small, barely making up for the earlier unexpected rises. What’s more, gasoline stocks barely moved despite the US driving season being in full swing. … US Weekly Petroleum Status …
15th July 2015
The price of cotton has been one of the better performing among agricultural commodities this year. However, we think prices are likely to fall as China seeks to sell its huge cotton reserves. … Sales of China’s cotton stocks to push prices …
14th July 2015
Today’s announcement of the deal reached between Iran and the West should, eventually, allow Iranian oil exports to return to their previous levels. However, the deal could still be disrupted by hardliners in both Tehran and Washington. In the short term …
Last month’s increase in supply from OPEC just adds to the glut of oil already in the market. And even with strong growth in demand over the next year, OPEC still expects the market to be well supplied. … OPEC keeps the taps firmly …
13th July 2015
After plummeting last week, iron ore prices have stabilised at around $50 per tonne. However, there appears to be little to support prices given that we expect a contraction in China’s steel output this year. Indeed, we only expect prices to find support …
Even though we do not expect the restrictions on US crude oil exports to be lifted anytime soon, there is still plenty of scope for exports to grow rapidly. … US oil exports muscle in on an already crowded …
Although market prices reacted positively to the USDA’s latest WASDE report, there is no evidence to suggest that world grain and soybean supplies are facing a significant tightening. We think the most likely path for prices over the remainder of the year …
China’s commodity import volumes were generally strong in June, although copper imports fell to a four-month low. We think government stimulus and infrastructure spending will boost demand for industrial raw materials in the second half of this year. … …
Global central banks continued to buy gold for diversification purposes in May. Buying was mostly concentrated among emerging markets’ central banks, with Russia once again particularly active. … World Gold Official Reserves …
June was a relatively quiet month for energy markets. However, since the start of July oil prices have tanked as worries about demand, prompted by crisis in Greece and China, and signs of improving supply weighed on sentiment.Indeed, we have been flagging …
10th July 2015
Commodity investors could be forgiven for a huge sigh of relief that this week is over. The combination of the crisis in Greece and – especially – worries about the fallout from the slump in China’s stock market hit oil and metals prices hard, although …
Data released earlier today by Malaysia’s Palm Oil Board show that although crudepalm oil production declined in June, it was still 12% higher y/y. Inventories alsoremain significantly higher on a year-on-year basis. … Malaysia Monthly Palm Oil Data …
US silver imports rose sharply in April, suggesting strong appetite from the second biggest consumer. Indeed, the US Mint ran out of coins last week as investors bought on falling prices. However, a slowdown in semi-manufactured silver exports suggests …
After a strong start to the year, South Africa’s platinum group metals (PGM) production fell substantially in May. This underpins our view that continued power disruptions, coupled with an increased risk of renewed industrial unrest, will cause production …
9th July 2015
Rising ethanol output in Brazil to meet domestic demand should help lift the price of sugar this year. We forecast the benchmark price at end-year at 13.5 US cents per pound, up from 12.3 cents today. … Ethanol demand in Brazil to support sugar …
US stocks of oil and gasoline unexpectedly rose again last week. However, the rise in oil stocks was much smaller than in the previous week and the recent fall in oil prices should boost demand further. … US Weekly Petroleum Status …
8th July 2015
The price of silver has been a notable casualty of the sell-off in commodity markets in the last few days. This is in line with the traditional pattern of under-performance by silver when the prices of other metals, especially gold but also industrials, …
We remain broadly positive on the outlook for most industrial metals prices in 2015-16 as we expect demand to pick up in the second half of this year and believe that some metals in particular may face tightening supply. But we are revising down a number …
The past month has seen a huge reversal of investor sentiment towards agricultural commodities. Surging grain and oilseed prices, on account of poor growing conditions in the US and Europe in particular, have been the catalyst for investors moving from a …
7th July 2015
The slump in equity prices in China has damaged confidence in global commodity markets, including oil and especially industrial metals. However, we think that the current negativity is overdone. While there are a few channels by which falling stock …
Exchange stocks of some base metals are at very low levels and could be a factor boosting prices later in the year. However, stocks of copper and aluminium, in particular, remain high and will act as a cushion in the event of any supply disruption. … …
The prices of precious metals have not responded as we had anticipated to the growing risks of a Greek exit (“Grexit”) from the euro. We are therefore revising our end-year forecasts for gold, silver, platinum and palladium lower, largely to reflect the …
6th July 2015
The combination of a Greek “no” vote, signs of rising US oil production, positive signals of a nuclear deal between Iran and the West as well as slowing Chinese demand for imported oil means that we are nudging down our oil price forecasts for this year …
Commodity markets have largely responded in the ways we had anticipated to the growing risks of “Grexit”. Oil prices in particular have fallen, undermined also by the prospects of a deal with Iran and signs of recovery in the US rig count. We have been …
A lack of safe-haven flows, despite the crisis in Greece, has left the gold pricevulnerable to the prospect of US interest rate hikes later in the year. Silver hasunderperformed, as is usual when sentiment towards precious metals isnegative. The more …
3rd July 2015
It was another strong week for the prices of many agricultural commodities as the USDA’s latest report on planting and stocks stoked concerns about a deteriorating supply outlook. However, given high current stocks, we think these fears are overdone and …
