• Audere Research

Commodities Monthly Roundup ~ February 5th



Energy


Goldman Sachs continues to target $65 for Brent by July of this year based on tight supply constraints. This view seems to be supported by oil’s steady rise despite new variants and slow vaccine rollouts, but the uncertainty surrounding the new COVID variants is undoubtedly keeping a lid on the pace of these price gains.


Demand for oil and fuels is expected to increase as the world regains control over the virus. FitchSolutions have been quoted as saying: “Demand will recover across the board, led by Asia-Pacific and North America. Europe and Latin America will lag, largely a reflection of softer economic recovery in key markets in these regions.”


Key to higher prices is the role played by OPEC and, in particular, Saudi Arabia. However, change may be afoot when we consider the wider OPEC+ group which includes Russia. Russia’s increasing influence could see a shift from price protection to the preservation of market share.


Over in the west, President Biden has rescinded the Presidential Permit for the Canada-U.S. cross border oil pipeline Keystone XL and suspended permitting for new oil and gas drilling leases on Federal lands and waters. This curtailment of the U.S. oil industry could increase its reliance on imports of oil with higher emissions than the crude pumped domestically. These “Green” moves by the new President may change the current supply dynamics significantly and prove supportive to Brent and other benchmarks. Russia and OPEC members will seize this opportunity to strengthen their positions in the global energy market.





Metals

Base metals prices on both the London Metal Exchange and Shanghai Futures Exchange remain mixed while participants await developments, especially U.S. stimulus negotiations. Demand has recovered strongly over the past year, particularly for copper and nickel. Some European steel producers pushed their official hot-rolled coil offer prices upward in the week ended 29 January, with buyers likely to accept some transaction price increases in the short-term. Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe, at €712.50 ($862.83) per tonne on January 29, up by €1.25 per tonne week on week, and by €47.50 per tonne month on month.

The big news for January was the LME tin contract which hit its highest level since 2014 on intraday trading and is up a whopping 37.97% year on year. Supply constraints out of Chile have caused copper import premiums to jump to their highest level in more than 5 months.





Precious Metals

Gold

Gold had a lacklustre January with silver stealing the headlines. Silver was up c. 5% on Monday 1 February driven by a massive retail frenzy and demand for physical silver has more than doubled since Thursday 28 January as investors rushed in to take advantage of increased demand. Gold may be protected from further losses as concerns for COVID-19 vaccine supplies add support. Looking forward, broader market risk sentiment will play a key role and a sustained move beyond the $1,875-76 horizontal resistance should pave the way for an extension of the recent bounce and target $1,900.

Platinum

Platinum has rallied for a third straight month to outperform palladium as the market bets on hydrogen-powered cars. ABN Amro published a note this week, entitled “The Stars Are Aligned For Platinum”, where it spelled out the impact of the hydrogen vehicle on platinum demand.






News Links

(Bloomberg) -- An increase in Iranian oil exports to China has received some unwanted attention in recent days and is now prompting fears of a clampdown. China’s Binge on Iranian Oil in Focus Following Tanker Seizures - BNN Bloomberg


Opec+ power shift points to lower crude price paradigm Opec+ power shift points to lower crude price paradigm (pemedianetwork.com)


U.S. Shale: Biden's Drilling Ban Actually Undermines Emission Targets U.S. Shale: Biden's Drilling Ban Actually Undermines Emission Targets | OilPrice.com


Biden's fracking ban gift to Russia and OPEC Biden's fracking ban gift to Russia and OPEC (washingtonexaminer.com)


LME aluminium price closed the week at US$1987/t; SHFE jumped to US$2352/t LME aluminium price closed the week at US$1987/t; SHFE jumped to US$2352/t on Monday; Aluminium Extrusion, Profiles, Price, Scrap, Recycling, Section (alcircle.com)


London Metal Exchange stocks shock sends zinc price reeling. Column: London Metal Exchange stocks shock sends zinc price reeling | Reuters


Gold Price Analysis: XAU/USD to push toward $1900 on a break above $1875 Gold Price Analysis: XAU/USD to push toward $1900 on a break above $1875 (fxstreet.com)


Citadel’s Silver Bet Exposes Rifts in the WallStreetBets Army Citadel’s Silver Bet Exposes Rifts in the WallStreetBets Army By Bloomberg (investing.com)




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