Commodities ended the week on low

Analysts at ANZ note that the commodities in general ended the previous week on low, with higher equity markets and stronger USD reducing investor appetite and the ANZ China Commodity Index ended the week down 1.6%.

Key Quotes

“Liquidity in crude oil markets remained extremely low, with prices ending the week largely unchanged. In fact, Brent oil traded in a very tight range of only USD1.70/bbl over the course of the week. This low volatility is the result of the market caught between the exuberance of production cuts from OPEC and concerns over rising inventories in the US. To compound things, the oil rig count in the US rose again last week, and at 597, is the highest since October 2015. We continue to view the trend of rising inventories and drilling activity in the US as expected consequence of rising prices after OPEC’s production cut agreement. However, it still remains unlikely to negate the impact of the falling output from OPEC, and as such we expected prices to eventually push higher.”

Base metals failed to react to further supply side issues, with rising concern about Chinese demand weighing on prices. Anglo America was the latest company to be forced to shut an operation, with the Soldado copper mine in Chile halted after the company’s plans for redesign were rejected by the regulator. While relatively small (36kt/y), it comes at a critical time for the copper market with the two largest mines; Escondida and Grasberg currently closed as well. However traders were focused on China, where surging credit is raising concerns that the PBOC will tighten soon.”

Iron ore prices rose slightly but ended the week higher. Steel and iron ore futures prices have been on a roller coaster ride this week, which has kept physical traders in two minds. According to SteelHome data, port inventories of iron ore rose slightly to 127.6 million tonnes last week. However we continue to hear that demand for high-grade ore remains strong, which should continue to support prices.”

Gold prices treaded water, with the stronger equity markets and USD negated by the continued safe haven buying as political uncertainty remains high. With expectations of three rate hikes and a stronger USD, political uncertainty will remain the driver of prices in the short term.”

Agriculture markets were weaker across the board. Grains continued to sell off as a lack of concerns over production added some uncertainty over whether the grains in crops prices over recent weeks can be justified.”