• Audere Research

Commodities Monthly Roundup ~ December 3rd

Commodity prices were on track for more record highs in November before Covid fears raised its ugly head once more. On Friday, 26 November markets tumbled on news of a new variant called Omicron and, without any proof of infection rates or indeed increased mortality rates, markets sold off heavily. The sell-off coincided with a USA Thanksgiving long weekend, and the consequent lack of liquidity helped prices fall drastically. Adding to this, Jerome Powell of the Federal Reserve decided to add his concerns that inflation is proving to be anything but transitory and so the doom and gloom continues. I believe that markets have oversold and will recover quickly. Supply shortages and under investment remain in force.


Energy


Oil prices are down over 20% from October highs and are near three-month lows with the CBOE volatility index up 67.22% MoM and OPEC+ seem to be adding to the bear markets by indicating that they will stick to their plan to add 400,000 bpd in January. Of course, reality is another issue as they have failed so far to meet their production targets, falling significantly short. JP Morgan have doubled down on their oil price predictions, citing a lack of capacity in OPEC+ production. Reuters have quoted a note from JP Morgan stating oil prices are expected to overshoot $125 a barrel in 2022 and $150 in 2023. I believe supply disruptions and economic recovery will continue to support the bulls for the next 12 to 18 months and don’t expect Omicron to dappen global recovery nearly as much as the market is currently pricing in. I recommend using any major dips to add to strategic longs or extend hedging.







Metals


Base metals have fared substantially better than oil prices with monthly price declines relatively muted. Indeed, copper is expected to remain underpinned throughout any economic uncertainties as the metal has widespread industrial application and supply remains tight. Nickel has recovered back above $20,000.






Precious Metals


Gold markets are grappling with rising concerns over Omicron and the Fed’s intention to bring it’s tapering forward. A rise in US Treasury yield will certainly prove negative for gold but in the longer term gold should continue to form part of a balanced portfolio, providing a hedge against both inflation and currency depreciation. The Silver price is trading within a tight range even as it remains on a downtrend. Palladium and Platinum continue to suffer the negative impact of a global shortage of semiconductor chips.






News Links


OPEC+ & Omicron Uncertainty https://talkmarkets.com/content/commodities/opec--omicron-uncertainty?post=336451


OPEC, Russia Agree to Keep Boosting Oil Output, Sending Prices Lower https://www.wsj.com/articles/opec-russia-agree-to-keep-boosting-oil-output-sending-prices-lower-11638457503?mod=rss_markets_main


Oil Prices Projected To Hit $125 In 2022 https://oilprice.com/Energy/Energy-General/Oil-Prices-Projected-To-Hit-125-In-2022.html


Morgan Stanley Slashes Oil Price Forecast On Omicron Fears https://oilprice.com/Energy/Energy-General/Morgan-Stanley-Slashes-Oil-Price-Forecast-On-Omicron-Fears.html


Why Palladium and Platinum Have Fallen Behind Other Commodities https://www.barrons.com/articles/palladium-and-platinum-prices-have-fallen-behind-other-commodities-51638436500


Aluminium dips on Omicron fears, but low inventories cushion fall https://www.reuters.com/markets/europe/london-aluminium-edges-higher-stockpiles-fall-demand-recovers-2021-12-02/?rpc=401&


China's top copper trader joins smelters in LME delivery for backwardation reliefhttps://www.fastmarkets.com/article/4016496/chinas-top-copper-trader-joins-smelters-in-lme-delivery-for-backwardation-relief


Automotive shift to EVs draws scrutiny on steel supplier sustainability, says Arcelormittal: Exclusive https://www.fastmarkets.com/article/4016281/automotive-shift-to-evs-draws-scrutiny-on-steel-supplier-sustainability-says-arcelormittal-exclusive


Delayed publication of chrome ore South Africa UG2 concentrates index and ferro-chrome benchmark indicator https://www.fastmarkets.com/article/4018475/delayed-publication-of-chrome-ore-south-africa-ug2-concentrates-index-and-ferro-chrome-benchmark-in


Tin Prices Are Rising As Indonesia Considers Banning Exports https://oilprice.com/Latest-Energy-News/World-News/Tin-Prices-Are-Rising-As-Indonesia-Considers-Banning-Exports.html


Commodity Futures Trading: Iron Ore, Copper, Oil, Gas, Gold, Nickel - Thursday, Dec. 2 https://talkmarkets.com/content/commodities/commodity-futures-trading-iron-ore-copper-oil-gas-gold-nickel-thursday-dec-2?post=336425




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