Commodities Update

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By: Andria Pichidi

Energy

Oil Action: USOIL has steadied on either side of the $23.00 level, though remains down nearly 6% on the day, after printing 3-week highs over $26 overnight. The weekly EIA inventory report yesterday revealed a much smaller than expected rise in crude stocks, but also a larger than expected build in distillate supplies, which offset the mildly bullish crude number.  The EIA reported US production slipped to 11.9 mln bpd in the latest reporting week from 12.1 mln bpd the previous week. March production levels were near 13.1 mln bpd.

Meanwhile, earlier today, the unexpectedly good trade report out of China, which reported a 8.2% y/y rise in exports, contrary to the median forecast for a 14.1% contraction, catalysed a risk appetite, which lifted also the commodities and commodity currencies. Currently the crude prices remain up by over 230% from the low seen near $10 on April 28th, though prices still remain down by over 74% from the highs seen in January,as the oil market is not out of the woods yet, as production cuts have so far been insufficient to offset the huge virus related crash in demand.

Hence, on the products side, EIA data shows that refinery utilisation continues to improve, while from trade side, China’s data shows that economies reopening globally could support in the near term the Oil price.

That said, going forward, focus is on economies that are reopening from virus-containing lockdowns, and how successful, extensive and durable this proves to be. This should rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada’s currency.

Metals

Metals meanwhile are trading mixed with gold, cooper, silver, platinum trading back from their highs, but holding at the same time well above year’s plunge, suggesting that there are some signs of a stabilisation in sentiment. Palladium is the exception in this, since it is trading in a negative territory since the end of March. Chinese data helped in the short term timeframe to partially dispel worries of a negative impact on metals demand via exports, although the detailed data are still unavailable. Nevertheless, the mining disruptions remain and should remain in the near future largely responsible for the tight market in metals since for the time being there is demand only from  smelters.


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