Commodities: Hiccup in Trump’s pro-growth policy taking its toll - ANZ
|Analysts at ANZ explain that a hiccup in Trump’s pro-growth policy agenda has seen investor sit back and assess the impact on commodity markets.
Key Quotes
“Crude oil prices were slightly higher on Friday but recorded its third weekly loss as growing output and inventories continued to weigh on the market. Baker Hughes data showed the number of oil rigs operating in the US rose another 21 to 625 last week. This followed on from an EIA report that showed US crude oil production rose for a fifth week to 9.13 mb/d. However, the market is likely to respond well to news that OPEC members are close to extending the production cut agreement. The small compliance committee consisting of five members (as well as Oman) recommended the agreement be extended when the wider group meets in May. Kuwait went even further, suggesting it should be continued until the end of the year. It did report that compliance in February was 106% for OPEC members, while non-OPEC nations were are 64%. That resulted in a overall compliance of 94%.”
“Base metals prices were largely weaker as the market grappled with conflicting fundamentals. Zinc bucked the trend as supply side disruptions seemed to escalate late last week. Flooding in Peru has caused disruptions at mines owned by Volcan Cia Mineral SA and Cia Mineral Milpo SAA. The miners have been forced to suspend operations and dig into stockpiles as roads and railways are unusable. Copper prices dipped slightly as Escondida workers returned to work. However, the situation remains fragile, with workers returning to the old contract for 18 months before another vote.”
“Spot iron ore prices continued to fall under the weight of selling in futures markets across Asia. The sell-off has been instigated by fresh curbs on lending in the housing market in China. The PBOC said newly divorced couples will be considered a second home buyer (which brings additional lending requirements). The central bank also barred the use of leverage financial products as down payment for loans. However, with the outlook for steel demand in infrastructure and housing markets remaining strong, we don’t see this weakness developing in to a major sell-off.”
“Gold posted a second straight weekly gain as the USD continued to weaken under concerns that the failure to scrap Obamacare would hinder Trump’s pro-growth policies. However, the PGM market has seen some action, with strong data from the European car sector sending palladium to a fresh two year high.”
“Agriculture markets were largely weaker, led by losses in soybeans. After falling through the key USD10/bushel, fund liquidation picked up and looks likely to continue for the mean time.”
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