Commodities: Mixed performance - ANZ
Analysts at ANZ explain that commodities were mixed in the previous session, with individually market fundamentals negating the positive impact of a slightly weaker USD.
Key Quotes
“Crude oil prices ended the week lower, recording its biggest weekly loss since November. WTI ended the week under USD50/bbl, while Brent is threatening to do so. Drilling activity increased for an eighth consecutive week, with data from Baker Hughes showing drill rigs operating in the US rose 8 to 617. This was followed by comments from Vitol (a global energy company), who said oil output in the Permian shale region in the US would increase by 600-700kb/d by the end of the year.”
“Base metals reversed the losses seen earlier in the week as the USD weakened amid signs that inventories are about to fall. Cancelled warrants (orders to withdraw metal from warehouses) in aluminium and zinc have been surging. Aluminium is at the highest since March, while zinc are at levels not since for two years. Worries about weak demand in copper were eased after LME inventories fell 0.6% on Friday, after rising sharply earlier in the week. Reports that Indonesia miner PT Aneka Tambang was preparing to seek permission to export nickel ore continued to weigh on the nickel price.”
“Iron ore were relatively unchanged as the weakness in steel and iron ore futures markets in China seen earlier in the week also dissipated. Coal prices pushed higher as reports that Coal India was struggling to meet output targets in 2017 raised hopes that imports of thermal coal would rise. The company expects to produce only 570mt in the current year, against a target of 598mt. Coal India produces more than 80% of India’s total production.”
“Gold prices continue to threaten to fall through the USd1200/oz. This week will be key for the metal, with the FOMC expected to raise rates at its monthly meeting.”
“Agriculture markets also mixed, with grains lower while softs stage a recovery. Corn remained under pressure after the USDA report last week showed higher corn output out of Brazil. Technical buying saw cocoa and sugar surge higher on Friday.”