Renewed supply risks pushes copper higher

By Daniel Hynes

Weaker US dollar and renewed supply issues pushed commodity ex-energy prices higher. Energy complex was under pressure from ample supplies.

Strong demand from new energy sector and renewed supply issues pushed copper prices towards USD8,500/t. China’s spot premium moved higher amid ongoing inventories withdrawal at the SHFE. This was contrary to rising inventories at the LME. Renewed supply risks in Peru and Panama raised concerns of tightening mine supplies and supported prices. However, other metals remained under pressure. Nickel traded below USD17,000/t level due to weak demand and strong supply.

Iron ore extended its gains to a nine-month high amid increasing optimism around additional China stimulus reviving the property markets. The latest announced funds of CNY1trn will be disbursed into construction projects. Per a Bloomberg report, 50 Chinese real estate developers may be eligible for financing. This could help steel demand from the construction sector to stabilise, although a seasonal decline in construction activity will act as a constraint to steel demand.

Gold prices hit USD2,000/oz as a sharp fall in the US dollar improved investor appeal. Physical demand looks strong with Switzerland exports increasing from 99.1t in September to 151.3t in October. Shipments to India tripled to 49.4t ahead of its festive demand.

Crude oil prices gave up their gains driven by speculation of OPEC+ making deeper cuts. Supply side developments were mixed. While market consensus suggests Saudi Arabia and Russia will be extending its voluntary cuts into 2024, any further cuts by other members will hold the key to future prices. Some of the members, like the United Arab Emirates, is set to boost its production by 135kb/d to 3.075mb/d in 2024. Russian oil exports declined to 2.7mb/d for the week ending 19 November ahead of the OPEC+ meeting on 26 November. This is the biggest week-on-week decline of 0.58mb/d and lowest exports in last two months. Iranian oil minister said that the country will increase its oil production to 3.6mb/d in 2024 and 4mb/d in 2025 from current production of 3.1mb/d.

European gas prices edged lower due to ample inventories. Gas storage remained almost full at 99% compared to the seasonal average of 88%. Colder weather forecasts for end of this month failed to lend support to prices. Further, renewed supply risk due to seizure of Israel-owned ship by Houthis, has faded. There was further bearish news as Russia is set to increase gas production after the launch of Artic LNG 2 with three production lines with an annual capacity of 6.6 million tonnes each. North Asian gas prices inched lower due to weak demand. Higher inventories in China and Japan kept imports subdued, which drove the Asian gas premium over Europe lower.

Data source: Commodities Wrap