Most of the major asset classes continued to rise in July, led by US real estate investment trusts, with US equities trending higher and the bull run persisting in the Global Market Index. The only loser in July was Emerging Market stocks. Against this backdrop the market remained broadly supportive of commodities. Preliminary estimates for July indicate that the commodity index rose by 5.5% MoM, slightly down from June’s rise of 6% MoM.
Energy
Crude stockpiles in the US fell to their lowest since January 2020 in the last week of July. This helped Brent to push past the $75 mark again after first doing so in June after almost two years since the level was last seen. However, concerns around the Delta variant and a compromise deal by OPEC+ saw Brent fall back sharply before the current recovery. Prices were further supported by the upbeat Fed policy statement. Fuel demand concerns remain however, with many analysts noting that pre-pandemic demand levels are unlikely to be reached until after 2022. In spite of Covid uncertainty, I would not bet on Brent and related products losing significant steam anytime in the near future. Brent closed out July at $76.33.
Metals
China accounts for about half of the world’s copper consumption and has recently targeted many key commodities including copper following surging prices. Tactics have included the selling of metals from it’s strategic reserves and threatening to punish any entities found to be hoarding supplies or inflating prices. This action notwithstanding, the metals complex remains up MoM. China is the worlds top aluminium producer and may have more of a price management impact here going forward. That said, the metal remains 3% up MoM and not far from it’s yearly high. Chile is the largest copper producer and is facing the possibility of strikes at three of it’s mines. Tin was the biggest monthly winner with a gain of 11.47% MoM. The shift toward green steelmaking is on route and complicates an already complex mix of market dynamics. The decarbonisation process is likely to lead to a squeeze on steel margins and create intense competition for resources and scrap.
Precious Metals
Gold has a bounce in its step as Covid concerns continue. The metal moved closer to its 200-day moving average and may be further supported by inflationary pressures and the US infrastructure bill making its way through the Senate this week. The trillion-dollar bill could further spur inflationary fears and drive investors to safe havens such as gold. The last trading day of July saw palladium prices chased by the bears as the XPD/USD risk reversal teased the biggest monthly drop for the metal since February and it closed down 4.19% MoM.
News Links
China has launched full-capacity production at its first independently developed deepwater oil project, which is located in the eastern section of the South China Sea, China National Offshore Oil Corporation… https://oilprice.com/Latest-Energy-News/World-News/Chinas-First-Deepwater-Oil-Project-Reaches-Full-Capacity.html
Russia saw its oil production rise for the first time in three months in July as OPEC+ continued to ease the production cuts and planned maintenance at some Russian oilfields… https://oilprice.com/Latest-Energy-News/World-News/Russia-Boosts-July-Oil-Production-As-OPEC-Allies-Pump-More.html
U.S. oil and gas lobbying groups have doubled down on efforts to negotiate laxer climate reporting rules with an administration bent on tightening these rules considerably, the Financial Times https://oilprice.com/Latest-Energy-News/World-News/US-Oil-and-Gas-Doubles-Down-On-Anti-Climate-Reporting-Lobbying.html
Oil climbs, notches fourth monthly gain on growing demand Oil climbs, notches fourth monthly gain on growing demand | Reuters
Japan has been making headlines with its plans to significantly increase its reliance on hydrogen to satisfy its energy needs. Right now, it is demonstrating its transformation... https://invst.ly/vms7s
Oil prices gained about $2 this week as supply concerns overrode fears of the effect of the Covid-19 Delta variant on consumer demand. Benchmarks Brent and West Texas Intermediate... https://nvst.ly/vmrdw
SEATTLE (Scrap Monster): The daily scrap gold prices - hallmarked and non- hallmarked declined modestly Tuesday, 3rd August, 2021 on the ScrapMonster Price Index. The prices of scrap silver too fell whereas Platinum staged recovery on Index.https://www.scrapmonster.com/news/-/1/80372
Institutional investors expect the price of palladium to rise in the coming months, according to new research. Palladium Futures Price - Investing.com UK
Palladium (XPD/USD) stays mildly bid around $2,680, up 0.10% intraday, as European traders brace for Tuesday’s bell. In doing so, the precious metal rises for the second consecutive day after crossing a downward sloping trend line from July 12.https://www.fxstreet.com/news/palladium-price-analysis-key-smas-probe-xpd-usd-bulls-below-2-700-202108030533
Factbox-China’s key commodities targeted by Beijing’s recent measures https://www.investing.com/news/commodities-news/factboxchinas-key-commodities-targeted-by-beijings-recent-measures-2578811
Workers at the Escondida mine in Chile are edging closer to strike action after rejecting BHP's final wage offer threatening the global supply chain. https://www.mining-technology.com/news/escondida-mine-chile/
Global Copper Supply at Risk As Workers Vote to Strike https://uk.investing.com/news/commodities-news/global-copper-supply-at-risk-as-workers-vote-to-strike-2431461
The recovery from the Covid-19 pandemic and pent-up demand caused steel prices to soar at a faster rate than those of raw materials – leading to massive margins for steelmakers. https://insights.fastmarkets.com/the-true-price-of-green-steel/
Call +44 (0) 203 884 992 to discuss further with an advisor.