• Audere Research

Commodities Monthly Roundup ~ November 4th

The dominant news for October was the Chinese energy crisis slowing the country’s growth. Figures released by the National Bureau of Statistics revealed growth of just 0.2% in Q3- the weakest quarterly growth since records for China began. This has led the country back to coal in the short-term, and a possible change in its CO2 commitments.


The various central bank stimulus packages globally have overheated markets and are now driving inflation ever higher. The Fed announced that it will begin tapering in November amid concerns that energy prices and supply chain disruptions continue to add to inflationary pressures.


Energy


Brent hit a 7 year high as markets continue to attempt to rebalance post the massive Covid19 sell-off. Chinese energy shortages and Putin’s gas power play with Europe both combined to support energy prices further.

Mexico has started hedging its 2022 oil production in the world’s most notorious and largest oil hedge, Bloomberg has reported, citing unnamed sources in the know.

The source told Bloomberg that the Mexican government was buying put options at prices between $60 and $65 per barrel.


The US Shale play has not returned to levels previously seen as most large shale drillers remain committed to capital discipline in attempts to keep their shareholders happy following years of burning cash to boost production.





Metals


Most base metals enjoyed a strong October with lead leading the way. Copper is now sliding as concerns over the Chinese economic slowdown mount. The metal is down approximately 9.5% from the October swing high. As major exchanges have failed to replenish supply copper prices have remained supported for the moment.


LME base metals have taken the Fed taper announcement in their stride with prices mixed, but up overall by an average of 0.3% on the day of writing this commentary.


Steel prices in general have benefited hugely from the post-pandemic recovery. US steel producers have struggled to meet demand and the green agenda is now creating demand for low-carbon steels.




Precious Metals


The Feds announcement that tapering will begin this month supported gold following a poor October, although the metal did end in the black, up 1.53% MoM. Keep an eye out for developments on the Russia/Ukraine border where Putin is once again amassing troops. Any military action will support gold.


Semiconductor shortages continue to plague the automotive industry and weigh on platinum group metals, with increased volatility the name of the game.





News Links


China Snaps up Emergency Arctic LNG Cargo https://oilprice.com/Latest-Energy-News/World-News/China-Snaps-up-Emergency-Arctic-LNG-Cargo.html


Winter is coming: European natural gas prices continue to rise as EU grapples with energy crisis https://www.rt.com/business/539276-eu-gas-prices-rise-winter/


Russia ending gas transit through Ukraine escalates risk of WAR, Kiev’s state gas firm claims as Nord Stream 2 tests continue https://www.rt.com/russia/539101-ukraine-transit-gas-risk-war/


The World’s Largest Oil Hedge Is More Secretive Than Ever https://oilprice.com/Latest-Energy-News/World-News/The-Worlds-Largest-Oil-Hedge-Is-More-Secretive-Than-Ever.html


U.S. shale producers signal more oil coming, as OPEC counts on restraint https://www.lse.co.uk/news/us-shale-producers-signal-more-oil-coming-as-opec-counts-on-restraint-v4bwu647l5htw7s.html


Aluminium prices likely to remain volatile as energy issues persist https://www.thehindubusinessline.com/markets/commodities/aluminium-prices-likely-to-remain-volatile-as-energy-issues-persist/article37318505.ece


US and EU ends dispute over steel and aluminium tariffs, take aim at China https://www.fxstreet.com/news/us-and-eu-ends-dispute-over-steel-and-aluminium-tariffs-take-aim-at-china-202110312213


Copper Hugs Trendline Support as Market Conditions Remain Tight https://www.dailyfx.com/forex/market_alert/2021/11/03/Copper-Hugs-Trendline-Support-as-Market-Conditions-Remain-Tight.html


China's top copper smelters agree to exports for LME delivery to ease backwardation https://www.fastmarkets.com/article/4014725/chinas-top-copper-smelters-agree-to-exports-for-lme-delivery-to-ease-backwardation


Under pressure! Steel margins on course to contract by 2022 https://insights.fastmarkets.com/the-true-price-of-green-steel/


As prices go up everywhere else, what can we expect for gold and silver? https://realmoney.thestreet.com/investing/stocks/silver-and-gold-prices-15821025


Great Opportunity to Put Money to Work Today in the Precious Metals Space https://www.investorideas.com/news/2021/mining/11036Precious-Metals.asp




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