Commerzbank Research Commodities Daily 2010-03-15

8/7/2019 Commerzbank Research Commodities Daily 2010-03-15

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Commodity Research

For important disclosure information please see last two pages

Energy: Oil prices dipped under the $81 a barrel mark again at the start of the week. Better-

than-expected US retail sales initially pushed oil prices above $83, before profit-taking was

seen on the back of lower consumer confidence. This again shows that financial investors and

not the fundamental data are currently determining prices. OPEC is convening on Wednesday

for a regular meeting on production quotas. A change in the official output quotas is not to be

expected, judging by the comments of OPEC representatives ahead of the meeting. One

problem is the falling level of quota compliance; according to OPEC, the decision to cut

production by 4.2 million barrels a day had recently only been implemented on a scale of

around 50%. Irans OPEC Governor therefore expects OPEC to demand stricter quota

compliance from its members, as otherwise the market is heading for an oversupply in the

second half of the year. Overproduction has so far been absorbed by the rising demand in

emerging countries. In the US and Europe, the demand for oil has not really recovered to any

significant extent up to now. In addition, there are concerns about renewed monetary

tightening in China. At the same time, speculative financial investors have increased their net

long positions in the week ending 9 March for the fourth week in a row. Positions have risen by

15 thousand to 159,400 contracts, their highest level since the record peak in mid January. We

still expect to see a significant price correction for crude oil. Speculative net short positions in

natural gas climbed in the same reporting week by 4 thousand to 151,307 contracts, the

highest level in four months. This again underlines the fact that the trading strategy of long oil

/ short gas is still very popular with speculative financial investors, at least for now.

Precious metals: Gold prices are showing relative strength and are still hovering above the

psychologically important mark of $1,100 a troy ounce. Significant price gains are probably

limited, though, because of speculation on possible gold sales by European central banks.

According to media reports, Germanys Finance Minister Schuble has proposed using gold

reserves to finance the European Monetary Fund. This proposal has been firmly rejected by

the Deutsche Bundesbank, however. The combined gold reserves of Germany, France and

Italy total 8,295 tons. This proposal is very unlikely to be implemented in our view. Gold prices

should therefore remain well supported at their present level, as current prices should

increasingly attract physical buying.

In the case of silver, speculative financial investors increased their net long positions in the

week ending 9 March by over 30% to 23.5 thousand contracts, the fourth consecutive weekly

rise. The level at the end of January has thus been reached again. This also explains the

strong rally of silver prices in this period, showing that financial investors are also controlling

events on the silver market.

CHART OF THE DAY:Risk of sharp copper price correction by financial investors

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10

2000

3000

4000

5000

6000

7000

8000

9000

spec. net long positions, ls Copper (US$/mt), rs

'000 contracts

Source: CFTC, Bloomberg, Commerzbank Corporates & Markets cbcm.commerzbank.com

Speculative market positioning (net)

09-Mar-10000

contractsWeeklychange

WTI 159.400 15342Henry Hub -151.307 -3977Gold 174.408 -2263Silver 23.463 5629Platinum 21.49 387Palladium 12.596 259Copper 22.384 2749Wheat -35.126 -958Corn 75.119 -4574Soybeans 23.369 -11793Cotton 52.228 5624Coffee 1.848 273Cocoa 17.973 -5762Sugar 111.401 -8545

Source: CFTC, Bloomberg

Head of Commodity Research

Eugen Weinberg+49 69 136 [email protected]

Analyst

Carsten Fritsch+49 69 136 [email protected]

Analyst

Barbara Lambrecht+49 69 136 [email protected]

Analyst

Michaela Kuhl+49 69 136 [email protected]

Analyst

Daniel Briesemann+49 69 136 [email protected]

Commodities Daily

Gold sales to finance EMF?


2/6

Commodities Daily

2 15 March 2010

Base metals: At the start of the new week, developments on metal markets are steered by

concerns on monetary policy tightening in China. For some time now, the Chinese government

has been trying to cool down the overheated local economy. According to market reports, an

interest rate hike could be imminent in China. This is causing metal prices to retreat across the

board. News on power failures across Chile after the earthquake last week, which has also

affected Codelcos copper production, is not drawing much market attention by and large. This

shows that the copper price is mostly technically driven at present and not by fundamental data.The downside potential has additionally increased after speculative financial investors built up

their net long positions in copper in the week ending 9 March by 14%, or 2.7 thousand, to 22.4

thousand contracts. These positions have therefore risen for four consecutive weeks and are at

the highest level again since the end of January.

With Vales nickel mines at Sudbury in Canada now on strike for the eighth month, Vale is

attempting to raise production with the help of external mine contractors. According to Vale, the

Sudbury mine should return to full capacity utilisation levels already by the end of the second

quarter. This will also expand the supply of nickel on the market, though, and this should

generally put pressure on prices.

Agriculturals: US wheat prices opened the new trading week 2% stronger at $4.85 a bushel.

This price increase is solely attributable to the roll-over of contracts. As the forward curve for

wheat is in contango, the April contract as the next contract due is higher than the March

contract, which expired on Friday. Wheat prices are likely to edge towards the level prior to the

contract roll-over again in the next few days, as the supply-demand situation is still extremely

comfortable for wheat. If we do see a rise in prices, then this will be mainly due to position-

squaring. The net short positions of speculative financial investors are at a high level again, at

35,126 contracts. However, provided there are no revisions of the wheat harvest outlook, the

short positions should essentially be maintained.

The marked fall in the price of sugar has been accompanied by a reduction in the net long

positions of speculative financial investors. These fell by 8 thousand to 111,401 contracts in the

week ending 9 March, which is the lowest level for three months and 30% lower than the peak at

the end of January. Price pressure on this front should therefore gradually ease.

Prices Inventories

Energy1)

current 1 day 1 week 1 month 1 year

Brent Blend 79.4 -1.1% -1.8% 9.0% 76%

WTI 81.2 -1.1% -1.2% 9.1% 75%

Gasoline (95) 787.0 0.0% 1.4% 18.2% 107%

Gasoil 665.8 0.2% 2.4% 13.8% 70%

Diesel 679.8 -0.5% 1.7% 14.0% 69%

Jet Fuel 715.3 0.0% 1.3% 12.0% 75%

Gas Henry Hub 4.40 -0.9% -3.5% -20.1% 11%

Base metals2)

Aluminium 2260.5 1.1% 0.9% 9.5% 67%

Copper, LME 7445 -0.3% -1.3% 7.4% 101%

Copper, SHFE (CNY) 57890 -1.4% -3.1% 9.5% 90%

Lead 2240 0.6% -0.8% 2.8% 79%

Nickel 21750 2.1% -3.4% 11.4% 124%

Tin 17550 1.2% 1.2% 6.1% 67%Zinc 2335 -0.2% -2.3% 5.3% 89%

Precious metals3)

Gold 1101.9 -0.7% -1.8% 0.2% 19%

Silver 17.1 -0.6% -1.4% 9.3% 29%

Platinum 1607.0 -0.2% 0.4% 5.9% 52%

Palladium 462.5 0.5% -3.9% 7.9% 128%

Agriculturals1)

Wheat, LIFFE (EUR) 121.8 0.4% 2.1% -3.2% -11%

Wheat, CBOT 485.3 0.8% -0.2% -0.6% -5%

Corn 364.3 -0.4% -0.3% 0.6% -3%

Soybeans 925.5 0.1% -1.6% -2.1% 5%

Cotton 80.5 2.2% -1.4% 8.9% 89%

Sugar 19.8 0.8% -8.1% -26.4% 54%

Coffee Arabica 130.2 -1.0% 1.7% -2.0% 20%

Coffee Robusta 1203.0 0.0% 0.3% -7.2% -21%

Cocoa 2910.0 2.3% 1.9% -5.9% 25%

Energy (US (DOE))* current 1 day 1 week 1 month 1 year

Crude oil 343003 - 0.4% 3.5% -2%

Gasoline 228984 -1.3% -0.6% 8%

Distillates 3655 -4.1% 7.1% -14%

Jet fuel 149604 -1.5% -4.2% 3%

Gas Henry Hub 1626 -6.4% -26.6% -3%

Base metals**

Aluminium LME 4518800 -0.1% -0.6% -0.8% 37%

COMEX 1767 0.0% 0.0% 0.0% -84%

Shanghai 387549 3.0% 7.6% 119%

Copper LME 532575 -0.6% -1.9% -2.8% 6%

COMEX 102138 0.0% -0.1% -2.2% 130%

Shanghai 155469 4.6% 32.7% 348%

Lead LME 170150 0.0% 0.1% 6.9% 188%

Nickel LME 158940 -0.3% -1.2% -3.9% 59%

Tin LME 23835 -0.1% -2.2% -9.7% 157%

Zinc LME 538750 -0.1% -0.4% 7.8% 56%

Shanghai 223433 0.0% 0.1%

Precious metals ***

Gold 10012 0.1% 0.4% 1.1% 15%

Silver 112060 0.7% 1.0% 2.7% -10%

Platinum 135 0.0% -0.2% -0.5% 50%

Palladium 630 0.0% 0.2% 0.0% 82%

Currencies 3)

EUR/USD 1.3767 0.7% 0.6% 0.9% 6%

Source: Bloomberg, Commerzbank Corporates & Markets

Percentage change on previous period1)

1 month forward,2)

3 months forward,3)

spot* 000 barrel, ** tons,*** 000 ounces


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Commodities Daily

15 March 2010 3

Net long positions of non-commercials vs price

GRAPH1:Crude oil (WTI) GRAPH 2:Natural gas (Henry Hub)

-50

0

50

100

150

200

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10

30

50

70

90

110

130

150

spec.netlongpositions,lS WTI($/barrel),rS

'000contracts

-250

-200

-150

-100

-50

0


2

4

6

8

10

12

14

spec.netlongposit.,lS HenryHub($/MMBtu),rS

'000contracts

Source: CFTC; Bloomberg, Commerzbank Corporates & Markets Source: CFTC; Bloomberg, Commerzbank Corporates & Markets

GRAPH 3:Gold GRAPH 4:Silver

0

50

100

150

200

250


700

800

900

100

110

120

spec.netlongposit.,lS Gold($pertroyounce),rS

'000contracts

0

10

20

30

40

50


8

10

12

14

16

1820

22

spec.netlongposit.,lS Silver($pertroyounce),rS

'000contracts


GRAPH 5: Copper GRAPH 6:Wheat

-30

-20

-10

0

10

20

30


2000

3000

4000

5000

6000

7000

8000

9000

spec.netlongpositions,lS Copper($/ton),rS

'000contracts

-60

-40

-20

0

20

40

60


300

500

700

900

1100

1300

spec.netlongposit.,lS Wheat(cperbushel),rS

'000contracts


GRAPH 7:Corn GRAPH 8:Sugar

-50

0

50

100

150

200

250

300


200

300

400

500

600

700

800

spec.netlongposit.,lS Corn(cperbushel),rS

'000contracts

0

50

100

150

200


5

10

15

20

25

30

spec.netlongposit.,lS sugar(cperpound),rS

'000contracts



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Commodities Daily

4 15 March 2010

GRAPH9:Forward curve oil market (WTI) GRAPH 10:Forward curve gas market (Henry Hub)

70

75

80

85

90

95

1M 8M 15M 22M 29M 3Y 43M

actual oneweekago onemonthago

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

1M 8M 15M 22M 29M 3Y 43M


Source: NYMEX; Bloomberg, Commerzbank Corporates & Markets Source: NYMEX, Bloomberg, Commerzbank Corporates & Markets

GRAPH 11:Forward curve aluminium (LME) GRAPH 12:Forward curve copper (LME)

2000

2100

2200

2300

2400

2500

2600

1M 8M 15M 22M 29M 3Y 43M


6400

6600

6800

7000

7200

7400

7600

1M 8M 15M 22M 29M 3Y 43M


Source: LME; Bloomberg, Commerzbank Corporates & Markets Source: LME; Bloomberg, Commerzbank Corporates & Markets

GRAPH 13: Forward curve Nickel (LME) GRAPH 14:Forward curve zinc (LME)

18000

19000

20000

21000

22000

23000

1M 8M 15M 22M


2100

2150

2200

2250

2300

2350

2400

2450

1M 8M 15M 22M


Source: LME; Bloomberg, Commerzbank Corporates & Markets Source: LME; Bloomberg, Commerzbank Corporates & Markets

GRAPH 15:Forward curve lead (LME) GRAPH 16:Forward curve tin (LME)

2100

2150

2200

2250

2300

1M 8M 15M 22M


16000

16500

17000

17500

18000

1M 4M 7M 10M 13M

actual oneweekago onemonthago Source: LME; Bloomberg, Commerzbank Corporates & Markets Source: LME; Bloomberg, Commerzbank Corporates & Markets


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Commodities Daily

15 March 2010 5

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