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Global aluminium output off to a slow start Global aluminium output fell by 4.5% y/y in the first month of 2022. A combination of high power prices in Europe and the New Year festival in China dragged down refined aluminium production. Looking ahead, we …
21st February 2022
It was a rollercoaster week for many commodities as tensions between Russia and the West over Ukraine ebbed and flowed and the West held talks with Iran over a new nuclear deal. In the end, it was signs of progress in the Iran talks that pushed oil prices …
18th February 2022
After it was slashed in the wake of the pandemic, capital expenditure by US oil producers is now rising. Given oil prices will probably remain high for a while, we suspect the recovery has longer to run. This could give a lift to US oil production this …
Stocks in Cushing likely to build in the coming weeks Commercial stocks in the US rose last week as refinery inputs fell and net imports increased. However, stocks in the WTI storage hub of Cushing, Oklahoma, dwindled further, causing WTI prices to rise. …
16th February 2022
In this Update , we discuss the possible ramifications for the global oil and natural gas markets of a Russian invasion of Ukraine. Much would depend on whether Western sanctions are placed on Russian energy companies and/or Russia decides to withhold …
The recent agreement between the US and Japan will allow the majority of Japan’s steel exports to enter the US without levies. We expect this increased supply will combine with slower growth in demand to lead to further falls in US steel prices through …
15th February 2022
Growth in China’s economy has slowed sharply and US interest rate expectations have jumped but commodity prices continue to hold up well . In some cases, constrained supply explains the resilience in prices and, in others, there are fears of supply …
11th February 2022
Growth in LNG exports, particularly from the US, will put downward pressure on natural gas prices in Asia and Europe. However, it will not be enough to return prices to pre-pandemic levels as stocks are low and demand growth is likely to remain strong, …
Our forecasts for commodity prices this year are subject to greater uncertainty than usual. While we expect growth in energy demand to slow, it may still be the case that supply remains constrained. As a result, energy prices may stay high for longer, …
OPEC oil production rises in January, but end-2022 targets look ambitious OPEC raised oil output in January, but the shortfall relative to target grew even larger. We never expected OPEC to manage to completely unwind its production cuts this year, but …
10th February 2022
US demand growth to falter later in the year Crude oil and product stocks fell last week, reflecting robust US demand. However, we think growth in product demand will slow over the course of this year in tandem with slower growth in the US economy . The …
9th February 2022
China’s refined metals output mostly rose in 2021, despite power rationing in Q4. We expect output growth to continue in 2022, which is a factor underpinning our view that metals prices will fall . Aluminium output in China grew by over 4% in 2021, as new …
OPEC+’s reluctance to consider a more radical adjustment in its output policy this week raises the risk that production falls short of the group’s target this year . Admittedly, the group agreed to a further 400,000 bpd increase in output in March. But it …
4th February 2022
A Russian invasion of Ukraine or severe ratcheting up of sanctions would add as much as 2%-pts to inflation in DMs, particularly in Europe. Given the inflationary backdrop and hawkish signals from central banks, monetary policy could be tightened more …
Product demand could get stronger in near-term Product demand remains very strong for the time of the year and, if gasoline demand mounts a recovery once COVID-19 cases moderate, it could get even stronger. Although, we expect that slowing economic growth …
2nd February 2022
Overview – Energy prices will remain volatile for the next few months, but should fall back later this year as demand drops back and supply picks up. That said, the shortfall of supply over the last year or so means that energy stocks are now extremely …
1st February 2022
The latest PMI data out of China suggest that demand for commodities softened again in January. And with Chinese demand unlikely to bounce back meaningfully this year, we continue to expect sharp falls in industrial metals prices by year-end as …
31st January 2022
The US Fed announced at its meeting this week that it will “soon be appropriate” to raise interest rates and hinted that a hike was coming as soon as March . (See here .) The US dollar strengthened, with the DXY index hitting an 18-month high of over 97, …
28th January 2022
Overview – Soaring energy prices have given a renewed boost to industrial metals prices in recent months but, if we are right, and power costs ease back from April, we think prices will fall sharply later in 2022. After all, demand for metal from key …
27th January 2022
Tentative signs of a revival in gasoline demand The surge in oil demand included the first signs of a recovery in transport-related gasoline demand. Although, we doubt demand will remain this buoyant for too long as economic growth is set to slow . The …
26th January 2022
Overview – Supply shortages have directly pushed up the prices of energy commodities and have indirectly raised prices of other commodities by boosting production costs. We think this will remain the case for at least another few months. But as we move …
A Russian military invasion of Ukraine would adversely affect the euro-zone economy by further disrupting the market for energy, pushing up inflation and reducing households’ real incomes. However, any economic fallout would probably be fairly small and …
25th January 2022
Despite falls in the prices of most other risky assets, including equities, commodities held up well this week . The prices of equities and commodities tracked each other relatively closely throughout the pandemic, but they have diverged sharply since the …
21st January 2022
Despite power rationing, aluminium output grows in 2021 Although global aluminium output fell in y/y terms in December, it still grew strongly over 2021. The lifting of power restrictions in China has helped increase global output despite a reduction in …
20th January 2022
Oil prices have risen sharply since the start of 2022 and natural gas and coal prices have remained high. We continue to expect energy prices to fall this year, but the latest developments on supply suggest that they will not fall by quite as much as we …
19th January 2022
OPEC under-production likely to continue OPEC continued to raise output by less than its target in December. However, the group is still steadily raising output, which is a key reason why we see the market moving into a surplus this year . The OPEC …
18th January 2022
The deadlocked end to talks between Russia, the US and NATO and subsequent hawkish noises from Russian officials have caused a risk premium to emerge on Russian asset prices and will keep the prospect of tighter Western sanctions on the table. The …
14th January 2022
Most commodity prices increased this week, with coal prices leading the pack on the back of Indonesia’s ban on coal exports this month. That said, we don’t see commodity prices rising for much longer . Indeed, Chinese imports of most raw materials fell …
After a stellar run in 2020-21, we expect the prices of most commodities to ease back this year as economic activity slows, notably in China, and supply bottlenecks start to ease . The macro-economic backdrop for commodities will deteriorate in 2022 . As …
13th January 2022
While high power prices and low stocks will support prices in the near term, we think that prices will pull back in the second half of 2022 as Chinese economic activity slows further and supply improves . With the exception of iron ore, the prices of most …
US oil demand improves, but will remain under pressure Commercial crude stocks slumped last week, reflecting a partial recovery in demand. However, we think demand will remain under pressure as COVID-19 cases rise in the US and as economic growth slows. …
12th January 2022
We see energy prices broadly falling this year as slower global economic growth should cool demand growth, but low stocks of many fuels mean prices will remain historically high and volatile for some time . At the start of last year, we forecast that the …
11th January 2022
Overview – Two themes have dominated commodity markets at the turn of the year: the ongoing shortage of energy commodities and the global rise in cases of COVID-19. On the former, we think that shortages will start to ease meaningfully later this year, …
7th January 2022
The experience of South Africa (see here ) with the Omicron variant seems to have allayed investors’ fears over commodity demand. Indeed, the net long position held by investors in the oil futures market has begun to rise, indicating an improvement in …
Omicron to weigh on demand for a few weeks yet Commercial crude oil stocks fell, but this reflected solid demand from refineries. Implied product demand – particularly for gasoline – slumped, suggesting that the public were cautious about travel in the …
5th January 2022
The December PMI data for China point to a healthy pick-up in commodity demand. But this only partially reverses the declines from earlier in 2021, and the big picture remains that commodity demand in China is set to struggle this year as headwinds facing …
4th January 2022
Demand tempered, but is likely to hold up well for now Commercial crude oil stocks fell sharply last week for the fourth week in a row. That was despite demand for oil products dropping back in line with the seasonal average. Early indicators suggest …
22nd December 2021
Weak steel demand will weigh on China’s steel output for some months yet Global steel production contracted in y/y terms in November, mainly owing to depressed output in China. Although China’s power rationing came to an end last month, there are no signs …
We always expected European natural gas prices to remain high over the winter because of low stocks, but heightened uncertainty about supply from Russia has caused prices to skyrocket again. Assuming supply isn’t affected, though, our expectation is that …
21st December 2021
Commodity supply shortages have been widespread over the last year or so There doesn’t appear to be a single cause of these shortages But a key theme is that prices are now close to a peak (if they haven’t peaked already) In this Commodities Watch , we …
Exchange stocks of base metals have fallen this year, as supply was interrupted by power rationing in China as well as the ongoing effects of COVID-19. However, now that power restrictions have been lifted, and with Chinese construction activity …
Output to bounce back in the months ahead, despite slipping in November Despite a y/y fall in global aluminium output in November, it is still up strongly year-to-date. And it is likely to rise again from here as power restrictions in China are lifted and …
20th December 2021
It was a week of central bank decisions, culminating in ‘Super-Thursday’. (See our Drop-In here .) The big picture is that central banks generally sounded more concerned about the rise in inflation , despite the ongoing spread of the Omicron variant. …
17th December 2021
Our estimates show a fall in the risk premium in the oil price since the emergence of the Omicron variant, as concerns over demand resurfaced. But the risk premium is still large, which adds weight to our view that oil prices will fall next year as the …
16th December 2021
Upcoming SPR releases could put a floor under commercial stocks Commercial crude oil stocks slumped last week as domestic demand strengthened and exports jumped. The decline in commercial stocks also came as strategic petroleum reserves fell. In the final …
15th December 2021
OPEC continues to over-promise on supply OPEC oil production increased in November, but once again by less than the group’s target. We think OPEC will continue to under-produce, but it should still account for a large share of the world’s oil production …
13th December 2021
We are sceptical that commodity demand growth in China is about to reignite, despite this week’s cut to the required reserve ratio (RRR) for most banks and data showing surprisingly strong imports of key commodities in November . After all, both …
10th December 2021
We doubt that the recent jump in China’s iron ore imports is indicative of increasing demand. In fact, we expect demand for iron ore in China to cool as construction activity continues to slow and the clampdown on excess steel production continues, both …
9th December 2021
US demand remains healthy, for now US commercial stocks remained range-bound, but there were sizeable additions to stocks of petroleum products. That said, implied product demand remains solid, despite rising new COVID-19 infections. Unless travel …
8th December 2021
Overview – Most commodity prices have fallen in the last week or so following the identification of Omicron – a new, and potentially more transmissible, strain of COVID-19. However, while commentary has generally focused on the effects that the new strain …
7th December 2021
