- Audere Research
Commodities Weekly Roundup ~ October 9th
After a positive start to the week, oil pulled back from a two-week high following revelations that President Trump had decided to halt stimulus talks involving a fourth package until after the election. This coincided with a larger than expected increase in US crude inventories, which rose by 951,000 barrels last week. Today markets have turned more bullish on news that President Trump has backtracked from stalling stimulus talks. Adding to the bullish tone for oil, Gulf of Mexico shutdowns due to hurricane Delta are driving oil prices higher. The DOE’s report later today will give the market further direction.
OPEC is reportedly estimating demand recovery to pre-crises levels as early as 2022 and have stated that “the worst is over” for the oil market. Interestingly net spec exposure is at a near decade low, paving the way for a possible strong price recovery.
The Benchmark aluminium price on the London Metal Exchange rose by 2 per cent to US$ 1804 per tonne at close of trading, October 8th, from US$ 1768 per tonne on Friday October 3rd. China market and the Shanghai Futures Exchange (SHFE) are closed for the National Day and Mid-Autumn Festival holidays from October 1 to October 8, 2020.
Strong gains were noted in the copper markets but bullishness has been tempered in the Asian sessions this week as the Chinese remained side-lined due to Golden Week.
Supporting the global bellwether for economic growth is the threat of strike action out of Chile which is the biggest producer of the metal. The resumption of US stimulus talks is also supportive. Copper prices have risen by almost 2% WoW.
Chinese steel production continues to support Zinc demand and bolster Shanghai prices, whereas outside of China the Zinc surplus remains elevated because of Covid 19. LME Zinc prices are up by 1.63% WoW.
A weaker USD continues to support gold as it holds above $1,900/oz and is likely to remain well supported through November as the US elections unfold. Gold backed ETFs have increased their long positions more in the past 9 months than any prior years.
Prices have remained fairly flat this week, ending 0.57% down WoW at $874.22 at CoB Thursday 7 October.
Top global traders push to cut shipping emissions
LONDON (Reuters) - Some of the world’s biggest commodities and energy players on Wednesday launched an initiative to cut and track emissions from the ships they charter as efforts intensify to reduce the maritime industry’s carbon footprint. (link)
Oil prices are unlikely to collapse again
The oil market has already priced in the slowing global demand recovery and the growing uncertainties about the economy amid resurging coronavirus cases in many parts of the world. (link)
Norway strike could shut giant Sverdrup oilfield on Oct 14
OSLO (Reuters) - Norway's Johan Sverdrup oilfield, the North Sea's largest with an output capacity of up to 470,000 barrels of oil per day, will have to close down production unless a strike among workers ends by Oct. 14, operator Equinor (OL:EQNR) said on Wednesday. (link)
OPEC cuts long-term forecast for oil demand growth, sees ‘continued disparity’ in climate policy
LONDON — OPEC on Thursday said it had downwardly revised its forecast for global oil demand growth over the long term, given the industry faced “an existential threat” this year in the wake of the coronavirus pandemic and as climate policies continue to shape the future of energy. (link)
Gold (XAU/USD) Threatened by Risk-on rally in stocks on stimulus hopes
Gold settled in the green zone on October 7 despite failing multiple times to regain the $1,900 mark. The precious metal benefited from broad-based US dollar weakness, inspired by the market optimism about a potential US stimulus and dovish FOMC minutes. (link)
Shanghai's billion-dollar metal hoard under spotlight as banks depart from repo deals
The world’s largest metals stockpile is becoming more difficult to finance. That is a problem for those who trade it, and for metal markets in general.
Shanghai’s Yangshan bonded zone is currently home to at least 245,000 tonnes of copper, more than double the amount housed in all London Metal Exchange warehouses combined, as well as heaps of nickel, zinc and aluminium worth $2.1-2.3 billion at today’s prices, down from around $4 billion in 2017. (link)
FOCUS: China to reassess domestic base metals mines to bolster resource security
After United States sanctions cut off supplies of microchips for Huawei smartphones, alarm bells began to ring out across all Chinese industries deemed as pivotal to the country’s future development, but reliant on imported materials.
Chen said the risk was particularly true in the Chinese copper sector, in which smelters take up more than half of the world’s total capacity, yet the country owns only 4.6% of global copper resources. (link)
Union at Chile's Candelaria copper mine begins strike
A union of workers at Lundin Mining´s Candelaria copper mine in Chile walked off the job on Thursday after talks broke down earlier this week, the head of the union told Reuters.
The Canadian miner had requested government mediation in September in a last-ditch effort to stave off a strike after failing to reach a contract deal, but the talks did not bear fruit. (link)
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