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This is the first edition of a new monthly publication, Energy Watch, which marks the next stage in the development of our Commodity service. This edition focuses on global oil prices and specifically on the impact of the Iran crisis, but the coverage …
27th February 2012
Copper stocks on the two main metal exchanges have been moving almost continuously in opposite directions since the start of the year. As a result, LME stocks are at a 2-year low, but inventories on China’s SHFE are near a 9-year high. We expect total …
24th February 2012
There are several grounds for thinking that the International Energy Agency (IEA) would be quicker to release stocks in response to a further surge in oil prices if due to tensions with Iran than it was last year following the loss of supply from Libya. …
23rd February 2012
The first estimates of the manufacturing PMIs for February improved in both China and the euro-zone, but remain at levels consistent with further falls in the prices of industrial metals. The detail on new orders is even less encouraging. … Improvements …
22nd February 2012
We expect both corn and wheat prices to decline over the next two years due to a combination of ample supply, increasing competition between key grains exporting regions and a disappointing global economic recovery. Traditionally, corn has traded at a …
20th February 2012
The apparent escalation in tensions between Iran and the EU over the weekend has been widely interpreted as bullish for oil prices. However, Iran’s position looks increasingly weak and the regime may now be close to backing down. A release of oil from …
Over the past decade increases in the price of copper have far outpaced those of aluminium. The flipside is that, during the downturn we expect over the next two years, we forecast aluminium prices to fall by only 10% by the end of 2013, while copper …
16th February 2012
Most commodity prices made a strong start to 2012, helped by increasing hopes that the US will lead a strong recovery in the global economy, declining fears of a “hard landing” in China, and faith that a disorderly Greek default can be avoided. But all of …
14th February 2012
China’s imports of commodities in January were surely distorted downwards by the relatively early timing of the Lunar New Year holidays. Nonetheless, there are plenty of signs of underlying weakness in the recent trade data, and in other indicators such …
10th February 2012
At least half a dozen explanations have been advanced for the recent jump in the price of Brent crude oil, whether in absolute terms or relative to the traditional US benchmark, West Texas Intermediate (WTI). We would give most weight to the current …
9th February 2012
The wider significance of the 25-year low recorded in the Baltic Dry Index – a composite of global freight costs for dry bulk commodities such as iron ore, coal and grains – has generally been downplayed as the slump is largely a reflection of the recent …
7th February 2012
The price of the benchmark no. 2 soft red winter has already fallen by around 20 US cents to just over 660 cents per bushel after Russia’s decision on Friday not to impose any tariff on its grain exports. The consensus appears to be that prices will now …
6th February 2012
Silver has been the best performing of the major commodities so far in 2012, rising by around 22% in dollar terms and even outpacing the 12% increase for gold. However, while we expect renewed concerns about the euro-zone to drive further gains in the …
3rd February 2012
January’s recovery in the price of copper was driven by four positives, none of which we expect to be sustained. Accordingly, despite hopes elsewhere of a sustained surge past $10,000 per tonne, from current levels of around $8,400, we continue to expect …
2nd February 2012
January was a better month for commodities, supported by hopes of an improvement in the global macroeconomic and financial backdrop. However, the recovery in the US economy has yet to convince even the Fed, which does not expect to be able to start to …
1st February 2012
The prices of most commodities, like those other riskier assets, have been rising after Wednesday’s Fed statement was widely interpreted as a “pledge” to keep US interest rates on hold until the end of 2014. But not only is this interpretation plain …
27th January 2012
Optimism about China’s demand and an improvement in general risk appetite among investors have led to a 10% increase in the benchmark Memphis cotton price, to around 90 cents per lb, from its 2011 low in December. However, we believe that the influence of …
26th January 2012
The announcement of a production cut by the second largest US natural gas producer, Chesapeake, caused the US natural gas price to jump yesterday. However, we do not expect this to stop the price of US natural gas dropping below $2 per MMbtu later this …
24th January 2012
In keeping with much of this week’s China data, today’s flash estimate of the manufacturing PMI supports our view that the economy is heading for a soft landing in 2012. However, we still do not think this will be sufficient to prevent further falls in …
20th January 2012
The price of gold has made an encouraging start to the year, rising by around 6% so far in US dollar terms and outperforming most other assets. Admittedly, at around $1,655 per ounce, gold is still well below the peak of $1,920 seen last September, and …
19th January 2012
The publication of OPEC’s monthly oil market report today has been overshadowed by two comments from Saudi Oil Minister Ali al-Naimi. First, Mr al-Naimi confirmed that Saudi output could be increased to offset any shortfall in global supply due to …
16th January 2012
The benchmark corn future in the US has already fallen by 50 cents to just over 600 cents per bushel after the world agricultural supply and demand report published yesterday by the US Department of Agriculture (USDA) eased global production concerns. The …
13th January 2012
The main driver of global oil prices so far this year has been concern about the potential disruption to supplies from the Middle East as a result of tensions with Iran. This Update looks at three scenarios: a gradual tightening of economic sanctions on …
12th January 2012
Most analysts attribute the renewed increase in the differential between the prices of Brent crude and WTI over the last few days primarily to changes in the composition of the two major commodity indices. Similar impacts are also being discussed in the …
The acceleration of the rice purchase scheme by the Thai government and setting of minimum export prices by the Vietnam Food Association (VFA) have led many analysts to argue that the price of benchmark Thai rice, which is currently 10% below its 2011 …
11th January 2012
China’s overall imports of commodities weakened slightly in December but the fourth quarter of last year as a whole was still strong. Indeed, imports of copper hit a record high last month. However, this may not tell us much about where prices will end …
10th January 2012
The recent divergence of steel prices in the US and Europe supports other evidence showing the relative strength of the US economy, such as the manufacturing PMIs, and will probably continue. However, steel prices in both regions are likely to be …
6th January 2012
The two greatest “tail risks” to oil prices this year are an escalation of tensions between Iran and the West (on the upside) and a worsening of the crisis in the euro-zone (on the downside). In assessing the relative importance of these risks there are …
5th January 2012
Commodity prices are ending 2011 with a whimper. Over the year as a whole the only major commodities to show significant increases are Brent crude and gold. Most components of the closely-watched S&P GSCI index have seen large falls, including declines of …
21st December 2011
This year’s sizeable falls in most commodity prices have highlighted two points that have actually been clear for much longer but are still not yet acknowledged by many commentators. First, even if some commodities are in the early stages of a multi-year …
20th December 2011
Declining stocks on global metal exchanges are often given as a reason to expect prices to rise. However, we are sceptical that the recent decline in reported copper stocks is due to strong end user demand. Instead, we think it is more likely that it …
15th December 2011
The first estimates of the manufacturing PMIs for both China and the euro-zone remained well below 50 in December. Despite the prospect of further monetary easing by the People’s Bank of China, buoyant Chinese demand for commodities should not be taken …
OPEC’s decision today to raise the official target for the cartel’s oil output to close to the current level of production will make no real difference on the ground, especially as it reportedly did not even discuss the setting of new quotas for …
14th December 2011
The volume of China’s commodity imports rose markedly in November, bolstered by weaker prices spurring restocking, probably instead of any upturn in final demand. Indeed, recent steps by the Chinese authorities to loosen policy indicate that sluggish end …
12th December 2011
The regular OPEC meeting on 14th December will be overshadowed by the crisis in the euro-zone and tensions with Iran. Our oil price forecasts give more weight to the fall-out from a further escalation of the economic and financial crisis in Europe, which …
9th December 2011
We expect the price of platinum to fall from $1,520 per ounce to $1,300 in the next year due to ailing industrial demand. However, this will probably prove to be a cyclical low unless the rand weakens dramatically against the dollar. … Platinum’s low to …
7th December 2011
Commodity prices ended November little changed, thanks to the technical rebound in WTI and the recovery in risk assets generally late in the month. The markets have taken the view that the cut in the already-low interest rate on an existing and …
2nd December 2011
Brazil, the world’s largest sugar producer and exporter, has revised down its sugar production estimate for 2011/12 due to bad weather. However, ample global stockpiles and improved harvests in other countries should more than compensate for this loss. We …
28th November 2011
China’s unofficial manufacturing PMI for November fell back markedly, to well below 50, raising fears of a hard landing in the largest commodity consumer. We still believe that a hard landing in China is unlikely, given the potential for policy loosening. …
23rd November 2011
The recent weakness of the gold price largely reflects the return of a degree of confidence in the US dollar, which has more than offset persistent worries about the sovereign debt crisis in the euro-zone. Nonetheless, we continue to expect gold to …
22nd November 2011
The recent pick-up in Chinese imports of refined copper has been interpreted as a sign that underlying demand is rebounding in the world’s largest consumer of industrial metals. However, a closer look at copper trade flows to that country supports our …
21st November 2011
The gap between the cost of Brent crude and the traditional US benchmark, West Texas Intermediate (WTI), is finally closing, but the episode has been another example of how speculative pressures can drive commodity prices well away from levels that can be …
17th November 2011
The consensus view is that continued buoyant demand from China will prevent the prices of industrial commodities, such as crude oil and copper, from falling very far, despite the worsening financial and economic crisis in the euro-zone. But this view is …
16th November 2011
Our baseline scenario is that an escalation of the crisis in the euro-zone will contribute to further large falls in almost all commodity prices over the next year or so, with gold and silver among the few exceptions. However, it is also worth …
15th November 2011
The price of a barrel of Brent could spike from current levels of around $114 to anywhere between $135 and $210 in the unlikely event of a military strike on Iran’s nuclear facilities by the US or Israel. However, this threat is itself a very powerful …
14th November 2011
Tin is caught in a battle between Indonesian producers, who have halted exports as they wait for the metal’s price to rise from $21,500 to $25,000 per tonne, and consumers hoping exports will resume before prices recover to this level. We expect consumers …
11th November 2011
Thailand, the world’s largest rice exporter, has lost up to a quarter of its main rice harvest due to recent floods. However, ample global stockpiles, improved harvests in other major rice producing countries, and the lifting of the Indian export ban …
The recovery in China’s commodity imports continued to gather pace in October. We remain of the view that this is mainly due to importers restocking, encouraged by lower prices, rather than any significant improvement in final demand. … China’s imports …
10th November 2011
The question of whether gold should be regarded as a “currency” might seem academic, but a discussion of the possible answers may shed some light on how best to analyse and forecast its price. Our view is that gold can be seen as a currency, and as such …
9th November 2011
Our already low end-2013 forecasts for the prices of a range of major commodities, including Brent crude ($75 per barrel), copper ($5,000 per tonne) and corn (500 cents per bushel), assume that the eurozone crisis escalates only gradually, contributing to …
3rd November 2011
