Commodities: Mixed performance in the absence of fresh supply-demand triggers - ANZ

According to the analysts at ANZ, commodities were mixed in the previous session, with markets lacking any clear signals on the supply-demand balance.

Key Quotes

“Crude oil prices were largely unchanged despite robust discussion about extending the OPEC production cut agreement. At a major industry conference in Houston (US), Saudi Arabia Oil Minister Khalid Al-Falih said that OPEC was making good progress in delivering promised production cuts, but had yet to decide on whether to extend them. Earlier in the day, Iraq and Angola had both signalled that they are willing to extend curbs on output into H2 2017. However, concern about the impact of US crude oil remains. This was heightened after the EIA released its Short Term Energy Report, which showed it had raised its forecast of US output to 9.21mb/d, up from 8.98mb/d (in the February report). Reports that clashes at Libyan ports had had a minimal impact on exports also weighed on prices.”

“Base metals were weaker across the board as another jump in inventories raised concerns about weak demand. Gains in copper stocks sparked this concern, with LME inventories up 11% during February. Nickel suffered heavy losses as investors took profits after recent gains. Reports that the potential ban on raw material exports may not eventuate may have contributed to the selloff.”

“Iron ore spot prices held steady, despite the selloff across the wider metals complex. Steel and iron ore futures inched higher in China, with traders waiting for clearer signals on the supply-demand balance. Exports of iron ore via Port Hedland fell from 40.3mt in January to only 35.7mt in February, reflecting weather related disruptions to operations in Western Australia.”

“The spectre of a rate hike in the US continued to weigh on gold prices, despite a relatively subdued USD. This sentiment is being echoed in ETFs, with holdings in SPDR Gold Shares (the largest gold-back ETF) falling to the lowest level in more than a month. This also mirrors moves in other safe haven assets, such as US treasuries where yields have climbed for the past seven days.”

“Agriculture markets were weaker, with losses centred on the softs market. Sugar prices collapsed after news that demand from India will be much lower than expected. The Indian Sugar Mills Association said there is no need to replace local supply with imports as stockpiles are sufficient to meet demand in the short term.”