The Commodities Feed: Trump weighs in on potential OPEC cuts

Warren Patterson ING Economic and Financial Analysis

Jan'19 Eurobob crack (US$/bbl)

Source: Bloomberg, ING Research

Energy

Trump weighs in on potential OPEC cuts: In response to OPEC looking at potential production cuts, President Trump yesterday tweeted “Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!”. This tweet certainly did not help prices, with WTI settling lower yesterday, and the downward pressure on both Brent and WTI has continued this morning. Given the growing global surplus over the first half of 2019, OPEC will likely try to ignore President Trump’s call as much as possible. Meanwhile later today, OPEC will release its monthly oil market report.

Gasoline weakness: Gasoline cracks remain under pressure, particularly in Europe, where they are in fact negative- the Eurobob crack has traded to a discount of over US$2/bbl recently. Gasoline inventories in both the US and the ARA region in Europe remain above the five-year high. In the US, inventories have remained stubbornly high even over refinery maintenance season. This is a trend that is unlikely to change anytime soon, as refiners increase throughput to ensure enough middle distillates for IMO 2020.

Metals

Zinc TCs strengthen: Zinc treatment charges in China continue to strengthen, partly helped by improving zinc concentrate supply around the globe, whilst inventories at Chinese ports have also edged higher. With global concentrate supply expected to continue growing into 2019, this should continue to be supportive for treatment charges. Stronger treatment charges are likely to see a pick-up in Chinese operating rates moving forward, increasing refined zinc supply.

Agriculture

CS Brazil sugar output: Industry body, UNICA, released 2H October production figures for the CS Brazil region yesterday. The industry crushed 24.86mt of cane over the second half of October, which was down almost 18% year-on-year. Meanwhile sugar production totalled just 958kt over the period, down over 49% YoY. This strong decline was due to the fact that mills continue to allocate a larger proportion of cane towards ethanol production, with domestic ethanol prices at a premium to sugar prices.

Ivory Coast cocoa arrivals: According to Bloomberg numbers, arrivals of cocoa at Ivorian ports have totalled almost 420kt so far in the season starting 1 October. This compares to around 286kt for the same period last year. Moving into the 2018/19 season there were growing expectations of a global deficit, however these arrival numbers suggest that supply from the largest supplier is, in fact, better than expected.

Daily price update

Source: Bloomberg

Read the original article: The Commodities Feed - Nov 13, 2018

Author

Warren Patterson

ING Economic and Financial Analysis

Warren Patterson is a commodities strategist at ING. He joined the bank in April 2016 and covers the entire commodities complex. Previously, he worked at a commodities trade house in London.

EUR/USD weakens as US jobs data trims Fed rate cut bets

The EUR/USD pair trades in negative territory for the third consecutive day near 1.1860 during the early European session on Thursday. Traders will keep an eye on the US weekly Initial Jobless Claims data. On Friday, the attention will shift to the US Consumer Price Index inflation report.

GBP/USD bullish outlook prevails above 1.3600, UK GDP data looms

The GBP/USD pair gains ground near 1.3635, snapping the two-day losing streak during the early European session on Thursday. The preliminary reading of UK Gross Domestic Product for the fourth quarter will be closely watched later on Thursday. The UK economy is estimated to grow 0.2% QoQ in Q4, versus 0.1% in Q1.

Gold remains on the defensive below two-week top; lacks bearish conviction amid mixed cues

Gold sticks to modest intraday losses through the Asian session on Thursday, though it lacks follow-through selling and remains close to a nearly two-week high, touched the previous day. The commodity currently trades above the $5,070 level, down just over 0.20% for the day, amid mixed cues.

UK GDP set to post weak growth as markets rise bets on March rate cut

Markets will be watching closely on Thursday, when the United Kingdom’s Office for National Statistics will release the advance estimate of Q4 Gross Domestic Product. If the data land in line with consensus, the UK economy would have continued to grow at an annualised pace of 1.2%, compared with 1.3% recorded the previous year.

The market trades the path not the past

The payroll number did not just beat. It reset the tone. 130,000 vs. 65,000 expected, with a 35,000 whisper. 79 of 80 economists leaning the wrong way. Unemployment and underemployment are edging lower. For all the statistical fog around birth-death adjustments and seasonal quirks, the core message was unmistakable. The labour market is not cracking.

Sonic Labs’ vertical integration fuels recovery in S token

Sonic, previously Fantom (FTM), is extending its recovery trade at $0.048 at the time of writing, after rebounding by over 12% the previous day. The recovery thesis’ strengths lie in the optimism surrounding Sonic Labs’ Wednesday announcement to shift to a vertically integrated model, aimed at boosting S token utility.