What is today's scenario for Commodities?
Commodities
Crude markets extended the weekend bounce on FT reports that the group is willing to extend and deepen cuts, “galvanised” by the Israel-Hamas conflict. The plunge in the dollar helped too with the December WTI contract up $1.71 to $77.60 and the January Brent contract up $1.54 to $82.15. A number of research reports suggested the recent drop had been excessive with Deutsche noting that Brent below $80 is “cheap relative to Q4 fundamentals”. However, Vitol noted that there are “reasons to be concerned” about weakness in Chinese energy demand. Bloomberg noted that the rise in rig count in the US last week by 6, the biggest in 6 months, was led by the Permian, citing an EIA report which expects production in the region to expand in both November and December. Meanwhile US natural gas prices slumped 2.5% to 7-week lows as concerns about high storage numbers weighed on sentiment.
Metals surged on the slump in the US$ to 2 ½ month lows. Indeed, copper had its best day since July, up 2.2% to $8,447, all but testing the 200dma. Warnings of a shutdown at First Quantum’s massive Cobre Panama mine which accounts for about 1.5% of global copper production helped lift sentiment too. However, other metals were less impressed with aluminium up just 1.7% to $2,244 and nickel unchanged at 2 1/2-year lows. The IAI reported that global aluminium output fell 0.1% in October, with estimated Chinese production down 0.5% but still up 5.5%yy.
Iron ore markets pushed to fresh highs with the December SGX contract up $3.20 from the same time yesterday to $132.35 and the 62% Mysteel index up $2.50 to $132.75. The AFR reported that “hundreds of train drivers at BHP’s lucrative iron ore operations in WA will kick off the sector’s first industrial action in decades as workers revolt against unpredictable treatment of working conditions”. The industrial action is set to commence Friday. Indian steel consumption rose 14%yy, pointing to rising infrastructure investment.
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