Commodities: Mixed as political uncertainty negated positive fundamentals - ANZ

Analysts at ANZ note that commodities were mixed in the last session, with political uncertainty negating some positive fundamentals.

Key Quotes

“Crude oil prices inched higher as OPEC left open the option to extend the production cuts they started implementing this year. Saudi Arabia’s energy minister, Khalid Al-Falih, said it’s unlikely they will need to continue production curbs, but “all players have indicated their willingness to extend, if necessary”. However, Nigeria announced its December crude output rose by 400kb/d to 1.94 mb/d.”

“Base metals were weaker across the board as investors took profits amid political uncertainty in Europe and North America. Nickel led the falls, with traders still reacting negatively to the news that Indonesia will allow exports of nickel ore under certain circumstances. We view the new policy as bearish for the nickel price in the short term, with inventories of nickel ore likely to seep into the market. Zinc also dropped sharply, with new data showing output reaching a two year high in November. This is raising concerns that capacity closures last year are now being reversed.”

“Iron ore surged higher as sentiment in the Chinese steel market continued to increase. Steel rebar futures climbed 5.7% in China as traders speculated that further capacity cuts at mills will boost steel prices. We believe there is also some level of end of year buying by traders as they look to cover needs over the Chinese New Year holiday.”

“Gold continued to find support on the back of political uncertainty. Traders remain cautious ahead of UK Prime Minister Theresa May’s speech on Tuesday, where she is expected to signal a full break with the EU market. A weaker equity market in Europe also saw investor appetite improve. This saw ETF holdings rise 2.5 tonnes to 1,771.7 tonnes (according to Bloomberg data).”

“Agriculture markets were closed for Martin Luther King Day in the US.”