Markets steady as they ponder geopolitical risks and stimulus measures
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
Rising tensions in the Middle East continue to hang over energy markets. Metals gained amid hopes of further stimulus measures in China.
Prices and commentary accurate as of 07:00 Sydney/05:00 Singapore/17:00(-1d) New York/22:00(-1d) London.
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Market Commentary
Crude oil prices gained last week amid over rising tensions in the Middle East. Israel’s government has yet to decide how to retaliate against Iran for a missile attack last week, according to a Bloomberg report. This is despite allies such as the US urging Israel not to target Iran’s oil industry. The lingering possibility of Iran’s oil output being disrupted has left the market on edge. Iran has also warned it will retaliate and is ready to launch thousands of missiles if needed. The US is expanding its sanctions on Iran’s oil and petrochemical sectors in response to the 1 October missile attack on Israel. It is sanctioning 17 ships and 10 entities that have been involved with shipping Iranian oil. Meanwhile, moves by OPEC members to better adhere to quotas are taking shape. Iraq said last month it is cutting its oil output by 260kb/d to 3.94mb/d, below its OPEC+ quota. Members that have been over-producing are expected to cut deeper than current quotas to make up for the extra barrels they produced.
Global gas prices remained volatile amid geopolitical risks to supply. European gas benchmark futures failed to hold gains from earlier in the week as traders ponder what a potential response from Israel would mean for supply. Concerns remain around the risk of closure of the Strait of Hormuz, a key waterway for LNG shipments. For now, a mild start to winter is helping assuage some of these worries about tighter supplies. North Asian LNG prices traded around USD13/mmBtu amid other supply side issues. Two production trains went offline at the Bintulu plant in Malaysia. This was partly mitigated by the No 2 production line at the Ichthys LNG export plant in Australia restarting last week.
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Copper surged last week on hopes that China’s recently announced stimulus measures would boost demand. So far, though, they have fallen well short of expectations. Despite the lack of details, the PBoC’s effective support of equity markets could ultimately be beneficial to commodity markets. A combination of stability in the real estate sector and stronger equity markets could see consumer sentiment rebound, which could bolster domestic confidence enough to lead to an economic rebound and stronger demand for commodities. Aluminium gained late in the week after Emirates Global Aluminium suspended operations at its bauxite mine in Guinea. The raw material is used to feed its alumina refinery in Abu Dhabi and is then converted into metal. The stoppage follows several other supply curtailments at mining operations at a time of strong demand.
Iron ore ended the week higher amid uncertainty over Beijing’s next move to support its economy. While officials have repeatedly said they will support the real estate market, little detail is available of any additional measures they will be implementing. Chinese steel rebar prices have continued to lift, suggesting the recent weak conditions are easing.
Gold prices remained steady as investors took stock of recent data that suggests the US Fed may not need to cut as aggressively as it did at the last meeting.?
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Chart of the Day
Supply disruptions in the alumina market are building again
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1 个月Good stuf