Commerzbank Research Commodities Daily 2010-03-16

8/7/2019 Commerzbank Research Commodities Daily 2010-03-16

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Commodity Research

For important disclosure information please see last two pages

Energy: The WTI oil price shed nearly 2% yesterday and, for the first time since the beginning

of March, dropped below the mark of US$80/bbl, pointing to a deterioration of the situation

from a chart-technical perspective and, hence, to further losses.

In the run-up to tomorrow's OPEC meeting, Saudi Arabia's oil minister expressed his

satisfaction with OPEC members' quota discipline. This statement does surprise though, given

that compliance with output cuts that were agreed upon at the end of 2008 recently fell to 53%.

Thus, it seems unlikely that OPEC will call for a stricter quota discipline tomorrow and.

Consequently, the current overproduction of 2m barrel per day could potentially expand further

during the coming months. This may have severe repercussions on the market balance. For

the second quarter, OPEC already expects a supply surplus of 1.5m barrel per day, should the

current output level be maintained. In addition, oil supply from non-OPEC members is also

rising which should increase competition for OPEC oil on the Asian market. Russian oilproducer Rosneft is selling 400K tons (2.9m barrel) of East-Siberian crude oil on the market for

delivery during the first half of April.

The flattening of the forward curve makes offshore storage of crude oil and oil products for

arbitrage purposes less attractive. The International Energy Agency (IEA) reported that the

amount of crude oil that is stored offshore in oil tankers declined in February by 7m to 52m

barrel. Inventories of oil products also shrank sharply to 74m barrel. This development is also

reflected in higher imports and rising stock piles in the US inventory statistics, as we have

already observed during the past several weeks. API data that will be released tonight should

cast further light on this trend.

Precious metals: Despite the firmer US dollar, the gold price continues to trade above the

mark of US$1,100/oz. Higher physical buying interest around this price level should prevent a

sustained erosion in the gold price. All eyes should be on tonight's interest rate decision by theUS Fed. Should the Fed maintain its current monetary policy of low interest rates for a

prolonged period of time, the US dollar is likely to weaken and this, in turn, should have a

positive impact on the gold price. This would also imply that short-term real interest rates will

remain negative, which reduces the opportunity costs of holding gold.

China's Ministry of Industry and Information Technology reported that domestic gold production

rose by 8% to 21.8 tons in January, of which 17.8 tons was produced by gold mines, while the

remaining 4 tons were by-products from nonferrous smelters. Since domestic jewelry demand

is traditionally high at the beginning of the Chinese year and since China's gold reserves still

remain at a relatively low level, most of the domestically produced gold should stay in the

country and is unlikely to contribute to an expansion in global gold supply.

CHART OF THE DAY:Declining inventories point to tight supplies of coffee

0

1000

2000

3000

4000

5000

6000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0

20

40

60

80

100

120

140

160

180

ICE coffee inventories ('000 bags), ls coffee (US cents/lb), rs

Source: ICE, Bloomberg, Commerzbank Corporates & Marketscbcm.commerzbank.com

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

Sustained high surpluses on metal markets

16 March 2010


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Base metals: After prices retreated yesterday on the back of a stronger US dollar, metals partly

regained their losses this morning. The market remains well supplied for from a fundamental

perspective. The International Lead and Zinc Study Group (ILZSG) reported that, in January,

both the zinc and the lead market had a supply surplus of 71.9K and 2.7K tons respectively.

Compared to the previous month, demand for both faced a sharper decline than production.

Consequently, the currently high stock piles should not be reduced significantly. At a level of

538K tons, zinc inventories in warehouses registered with the LME are at a 4 -year high, thoseof lead, amounting to 170K tons, reached the highest level since mid-2003.

Stock piles on the aluminium market are rising continuously. According to data provided by CBI

China, aluminium inventories in warehouses both outside and registered with stock exchanges in

China currently amount to 956K tons. At the end of last year, they "only" amounted to 626K tons.

Further, CBI China estimates that inventories will exceed the 1m-ton mark soon, since

aluminium production in China continues to expand strongly and is likely to exceed demand this

year. Moreover, CBI China assumes that aluminium imports will drop to 400K tons. Against this

backdrop, we see massive risk of a correction in metal prices.

Agriculturals: The price of Arabica coffee fell again below the level of US Cents 130 per pound

yesterday. The low price level insufficiently reflects the current supply and demand situation. The

International Coffee Organization (ICO) lowered its estimates for the 2009/10 season's global

coffee crop volume by 500K to 123.1m bags, representing a 3.9% decline from the previous

year. This move is primarily the result of a lower coffee crop in Colombia. Moreover, as part of

the two-year-coffee growing cycle, Brazil's coffee plants are currently passing through the lower-

yielding crop season. Global consumption, on the other hand, should amount to between 132m

and 134m bags, potentially resulting in a market deficit that will be in the double-digit millions

range. Coffee stock piles at the ICE in New York, which are already at a 7-year low, may decline

even further. Expectations of an improved coffee crop in Brazil and Colombia drove speculative

financial investors to reduce their net-long positions and brought the price of Arabica coffee

under considerable pressure during the past several weeks. Owing to unfavorable weather

conditions, supply could potentially increase to a lesser degree than was previously expected.

Furthermore, Brazil's government could purchase coffee from domestic coffee growers again to

reduce supply, should prices not significantly recover. Hence, we see significant upside potential

for the coffee price.

Prices Inventories

Energy1)

current 1 day 1 week 1 month 1 year

Brent Blend 77.9 -1.9% -3.0% 2.4% 76%

WTI 79.8 -1.8% -2.4% 3.3% 68%

Gasoline (95) 780.0 -0.9% 0.0% 16.4% 92%

Gasoil 649.3 -2.5% 0.1% 6.5% 71%

Diesel 669.0 -1.6% 0.1% 11.8% 68%

Jet Fuel 704.0 -1.6% -0.9% 9.4% 75%

Gas Henry Hub 4.39 -0.2% -2.9% -17.4% 14%

Base metals2)

Aluminium 2227 -1.5% -0.5% 5.4% 65%

Copper, LME 7305 -1.9% -1.7% 3.3% 93%

Copper, SHFE (CNY) 58150 -0.2% -2.3% 10.0% 89%

Lead 2224 -2.7% -0.9% -3.2% 72%

Nickel 21500 -1.1% -1.4% 7.9% 117%

Tin 17450 -0.6% 0.7% 5.8% 71%

Zinc 2280 -2.4% -2.8% -1.2% 85%

Precious metals3)

Gold 1108.5 0.6% -0.9% -0.6% 20%

Silver 17.1 0.3% 0.0% 6.9% 34%

Platinum 1623.0 1.0% 2.0% 5.5% 53%

Palladium 462.0 -0.1% -0.9% 6.8% 132%

Agriculturals1)

Wheat, LIFFE (EUR) 121.8 0.0% 4.3% -2.8% -11%

Wheat, CBOT 479.3 1.5% 0.4% -4.9% -12%

Corn 363.3 2.6% 1.5% -0.9% -7%

Soybeans 930.0 0.4% -0.5% -3.0% 3%

Cotton 80.8 0.4% 0.8% 6.7% 87%

Sugar 19.3 -0.5% -5.1% -29.5% 48%

Coffee Arabica 128.7 -1.2% 0.0% -3.1% 19%

Coffee Robusta 1201.0 -0.2% 0.9% -6.6% -22%Cocoa 2853.0 -2.0% 0.9% -7.8% 20%

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 4512725 -0.1% -0.6% -0.8% 34%

COMEX 1767 0.0% 0.0% 0.0% -84%

Shanghai 387549 3.0% 7.6% 119%

Copper LME 531200 -0.3% -1.9% -3.3% 7%

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

Shanghai 155469 4.6% 32.7% 348%

Lead LME 170425 0.2% -0.1% 7.1% 189%

Nickel LME 158598 -0.2% -1.0% -3.9% 59%

Tin LME 23765 -0.3% -2.8% -9.3% 148%

Zinc LME 538425 -0.1% -0.4% 7.7% 57%

Shanghai 223433 0.0% 0.1%

Precious metals ***

Gold 10024 0.1% 0.5% 1.3% 15%

Silver 116945 4.4% 6.0% 7.1% -6%

Platinum 135 0.0% -0.2% -0.5% 22%

Palladium 630 0.0% 0.2% -0.1% 82%

Currencies 3)

EUR/USD 1.3676 -0.7% -0.6% 0.6% -5%

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

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GRAPH1:Forward curve oil market (WTI) GRAPH 2:Forward curve gas market (Henry Hub)

75

80

85

90

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 3:Forward curve aluminium (LME) GRAPH 4:Forward curve copper (LME)

2100

2200

2300

2400

2500

2600

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


6700

6900

7100

7300

7500

7700

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


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

GRAPH 5: Forward curve Nickel (LME) GRAPH 6:Forward curve zinc (LME)

19000

20000

21000

22000

23000

1M 8M 15M 22M


2200

2250

2300

2350

2400

2450

1M 8M 15M 22M


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

GRAPH 7:Forward curve lead (LME) GRAPH 8:Forward curve tin (LME)

2150

2200

2250

2300

2350

1M 8M 15M 22M


16500

16750

17000

17250

17500

17750

1M 4M 7M 10M 13M

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


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