- Audere Research
Commodities Monthly Roundup ~ March 4th
Oil continues its bullish recovery with Brent Crude having risen to $65 a barrel, well before Goldman Sachs’ target of mid 2021. Indeed Goldman’s is now targeting $70/bbl in 2Q21 and $75 in 3Q21. This is partly driven by better than expected demand recovery and partly by continued supply constraints. Upward price pressure is likely to be supported by reflationary activities of the major economies. Positive developments in the COVID vaccination race and a return to summer in the northern hemisphere is expected to increase activity, and should be followed by higher jet fuel demand.
Goldman’s expects a supply lag to remain in force and the U.S. shale industry to continue its focus on returning cash to investors. Tighter inventories are likely to support a steeper level of backwardation going forward, presenting an ideal opportunity for longer tenor hedges for consumers of oil products. Under-investment in production capacity as the green energy debate gains support will contribute to tighter supplies and is expected to be further exacerbated by an unwillingness to finance new capacity by the major credit providers. ESG headwinds will further complicate investment in fossil fuels.
However, COVID risks remain and the market is keenly focussed on the vaccine rollout and efficacy.
Aluminium has had a more muted YoY recovery than most metals, rising 26%, but it is seeing support as concerns of supply cuts in China, the top producer grows. Reuters reported that China’s Inner Mongolia, a major aluminium producing region, may reject new projects that consume large amounts of energy in a push to meet its energy efficiency targets.
Copper, the bellwether base metal for manufacturing activity, is up 63% YoY having gained another 16% in February. The metal hit multi-year peaks in six consecutive sessions in the start to 2021. The broader macro economic backdrop remains very supportive of copper. Similarly nickel and tin are up 53% and 45% respectively, YoY.
Demand recovery following the pandemic together with highly accommodative monetary policies and fiscal policies should continue to support base metal prices.
Gold experienced the worst month in four years as global bond yields continued to rise, down 6% MoM and nearly 20% from its August peak. The metal remains vulnerable to US Treasury yields and the possible impact of Biden’s economic recovery package. Gold has a reputation for being an uncorrelated investment, and its current fall while nearly every other speculative asset is rising serves to reinforce this reputation.
Platinum has had a fantastic year, recovering almost 40% YoY and 10% in February. Current supply dynamics favour palladium and platinum. These metals, together with rhodium are used by the automotive industry to filter emissions and were all in short supply in 2020. Last month’s 30% surge in vehicle sales in China, the worlds largest car market, continues to support these metal’s price gains.
Middle East producers are desperate for higher oil prices
A further factor that could affect oil market stability in the short term is the OPEC+ meeting today March 4, a potentially significant event in determining policy for the rest of the year Middle East producers are desperate for higher oil prices (neftegazru.com)
OPEC+ is poised to cool oil market with extra production
OPEC+ is poised to agree a production increase this week as it seeks to cool a rapid rally in crude prices. OPEC+ is poised to cool oil market with extra production - News for the Oil and Gas Sector (energyvoice.com)
Big Oil Clashes Over Fossil Fuel Future
“Hydrocarbons are still going to be essential for providing energy to the world, especially in the near term,” Baker Hughes’ Lorenzo Simonelli said, echoing an earlier statement that “There is no scenario where hydrocarbons disappear,” as expressed in his opening speech at the Baker Hughes annual meeting held last month. Big Oil Clashes Over Fossil Fuel Future | OilPrice.com
Why gold has been such a bad investment so far this year
Gold – the ultimate safe haven investment – is proving anything but safe. Its lost over $200 an ounce since its high at the start of the year. Dominic Frisby looks at what’s gone wrong. Why gold has been such a bad investment so far this year | MoneyWeek
Gold (XAU/USD) has returned to the red zone, as the US dollar appears to have found its feet after Tuesday’s corrective decline. Gold Price Analysis: 21-SMA on 4H limits the XAU/USD recovery ahead of US data (fxstreet.com)
Can platinum's price surge continue? World Platinum Investment Council gives forecast
(Kitco News) - Many of the factors that have held back platinum in the past, including demand, liquidity in the futures markets, and visibility, are now becoming tailwinds for the price, said Trevor Raymond, director of research at the World Platinum Investment Council. Can platinum's price surge continue? World Platinum Investment Council gives forecast | Kitco News
GLOBAL COPPER WRAP: Spot buyers cautious on high price, backwardation
Spot trading sentiment in the global copper market is low this week with buyers cautious on the high copper price and backwardation, leaving premiums mostly stable except for a slight rise in Rotterdam, sources told Fastmarkets on March 2. GLOBAL COPPER WRAP: Spot buyers cautious on high price, backwardation | Metal Bulletin.com
EUROPE HRC: Domestic prices stable in the north, overall sentiment stays bullish
Domestic prices for steel hot-rolled coil in Northern Europe stood unchanged day on day on Tuesday March 2, with the mood across the region still bullish because of tight supplies, sources told Fastmarkets. EUROPE HRC: Domestic prices stable in the north, overall sentiment stays bullish | Metal Bulletin.com
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