Commodities Market Guide

Market conditions have not tightened yet

Key themes

The OPEC and non-OPEC deal to cut output, La Niña weather and the demand-push from new

US President Donald Trump’s plan to increase fiscal spending on infrastructure and defence
have not resulted in significantly tighter commodity market conditions to start the year. Most
prominently, US crude stocks continue to rise in seasonally adjusted terms, highlighting that
although market conditions in 2017 will likely be the tightest in years there is still an abundance

of supply available to limit the upwards impact on prices from this development. USD has
weakened somewhat to start the year. On a 1-2Y horizon we look for additional USD weakness
to be a supportive factor for commodity demand and prices.

Oil


OPEC and Russia’s decision to cut output has lifted oil prices, but market conditions have

not tightened as expected, highlighted by rising US crude stocks. We look for prices to rise
further, mainly on the back of stronger demand and a weaker USD. We recommend
consumers to hedge exposure in Q4 17 and 2018.

Metals


Trumpflation has hit the world base metals market, supporting prices on top of the effect

from higher global manufacturing activity and declining upstream supply. We recommend
that consumers hedge exposure in nickel in 2017 and 2018 and copper in 2017 at current

levels.

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