Commerzbank Research Commodities Daily 2010-03-17

8/7/2019 Commerzbank Research Commodities Daily 2010-03-17

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Commodity Research

For important disclosure information please see last two pages

Energy: The WTI oil price has advanced by nearly 3% since yesterday and trades above the

mark of US$82/bbl this morning. Brent trades at US$81/bbl after the roll-over to the May

contract. A weaker US dollar boosted the oil price. Last night's API data release on inventories

lent additional support to the oil price. Accordingly, crude oil inventories rose again by 400K

barrel last week, despite a marked contraction in crude oil imports. Gasoline stocks, on the

other hand, declined significantly by 3.7m barrel and inventories of distillates also saw a

moderate decrease. Refinery capacity utilization remained unchanged and the reduction in oil

product inventories should be primarily attributable to a rise in demand. Current data provided

by MasterCard confirms this trend. Accordingly, last week's gasoline consumption in the US

was only slightly off its eight-month high that was recorded during the previous week. Average

gasoline consumption during the past four weeks was up 2.3% y-o-y. Since gasoline prices at

gas stations in the US rose to their highest level since October 2008, demand for gasoline may

level off. Further, the most recent widening in refinery margins could lead to an expansion in

gasoline output, which may prevent a reduction in gasoline inventories. Today, the US

Department of Energy releases its official inventory data. Moreover, the regular meeting of

OPEC member countries is also taking place today. In view of the comfortable price level,

OPEC is unlikely to decide on a change to the formal output quotas. We believe that the

current price level of above US$80/bbl is not sustainable and expect a correction. Owing to the

seasonally low demand for oil during the second quarter, the market is likely to face a

significant oversupply, which could bring prices under pressure during the coming months.

Precious metals: The gold price gained 2% on the back of a softer US dollar and is currently

trading at around US$1,130/oz. The US Fed confirmed yesterday that it will maintain the

exceptionally low level of interest rates for an extended period of time. Prior to this

announcement, the Euro had already significantly appreciated, since the rating agency

Standard & Poor's affirmed Greece's sovereign debt rating at BBB+.

The platinum price temporarily advanced to US$1,640/oz, the highest level since mid-January.

As a result, the platinum-gold ratio increased to the highest level since mid-September 2008.

In addition to an increased demand for autocatalysts, helped by a recovery of the car industry,

platinum also benefits from a significant rise in investment demand. Analyzing the historical

platinum-gold ratio reveals that at 1.46, the ratio is not particularly high, implying that platinum

still has potential to catch up. Platinum could already see significant gains during the coming

months, should there be power-supply rationing during the Football World Cup in South Africa,

which could potentially impair platinum production. South Africa accounts for nearly 80% of the

global mining production of platinum.

CHART OF THE DAY:Platinum is still not expensive compared to gold

0.80

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

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

Platinum rises faster than Gold

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

US-inventories crude oil /productsAPI DOE

12.3. Survey 5.3.

Crude oil +0.40 +1.1 +1.43Gasoline -3.65 -1.0 -2.96Distillates -0.76 -1.3 -2.22Utiliz. (%) +0.40 +0.0 -1.14Imports -1.23 -0.74Weekly change in mm barrels, imports inmbpd

Source: API, DOE, Bloomberg

Head of Commodity Research

Eugen Weinberg+49 69 136 [email protected]

Analyst

Carsten Fritsch+49 69 136 21006

[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

OPEC is likely to maintain output quotas

17 March 2010


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Commodities Daily

2 17 March 2010

Base metals: After metal prices already recorded gains across the board yesterday, they

continue their upward trend this morning. Copper, for instance, is currently trading above the

mark of US$7,500 per ton and nickel above US$22,000 per ton again. Metal prices are

benefiting from a weaker US dollar and firmer global equity markets, which leads to an increase

in risk appetite. Current price levels are, however, not justified by fundamental factors.

The spot price for iron ore rose to just under US$140 per ton, the highest level in 14 months. Not

only BHP Billiton, but also the world's top iron-ore producer Vale, based in Brazil, attempts in its

price negotiations with Chinese and Japanese steel producers to switch from annual to quarterly

contracts, in order to benefit from high spot prices. Reportedly, some iron ore contracts might be

retroactively priced to January 1st. It is questionable, however, whether steel producers are able

to pass on the expected significant raw material cost increases to their clients. China's largest

publicly traded steel maker, Baoshan Iron & Steel Co., keeps its steel prices unchanged in April.

Meanwhile, China's Ministry of Commerce announced that it will potentially become involved in

the price negotiations to ensure that the pricing mechanism based on annual contracts is being

maintained, in order to prevent higher price volatility. Not only face steel producers higher iron

ore prices, but they are also confronted with higher coal prices. BHP Billiton recently reached an

agreement with Japanese steel producers on a 55% increase in coking coal prices for the

second quarter.

Agriculturals: The sugar price dropped by yet another 6% to a 7-month low of US Cents 18.24

per pound yesterday. Since its high at the beginning of February, the sugar price has been

facing a 40% correction. The extent of the price decline leads us to conclude that speculative

financial investors are liquidating their positions. Moreover, the price decrease is being

exacerbated by the fact that physical buyers of sugar postpone their purchases on expectations

of a continued price erosion. India's sugar producers have started to demand that the Indian

government should revoke measures that were originally implemented to prevent sugar prices to

rise. Among others, these include duty free imports of raw and refined sugar. We view the extent

of the price decline as overdone, even though the outlook on sugar production has improved

recently. The Maharashtra State Cooperative Sugar Factories Federation estimates that India's

sugar production will rise to between 16.8m and 17.2m tons this crop season. For the next crop

season, the association expects a further expansion to 22m tons. This output level would still lag

far behind the production volume of 28m tons that was recorded about 2 years ago and theconsumption level of the past several years that ranged between 23m and 24m tons.

Prices Inventories

Energy1)

current 1 day 1 week 1 month 1 year

Brent Blend 80.5 1.5% 0.6% 6.2% 68%

WTI 81.7 2.4% 0.1% 6.2% 67%

Gasoline (95) 794.0 1.8% 1.8% 15.1% 97%

Gasoil 672.3 3.5% 1.9% 10.9% 69%

Diesel 687.3 2.7% 1.1% 10.2% 66%

Jet Fuel 727.3 3.3% 1.6% 9.7% 72%

Gas Henry Hub 4.35 -1.0% -4.8% -19.5% 14%

Base metals2)

Aluminium 2258 1.4% 1.9% 7.1% 66%

Copper, LME 7405 1.4% 0.9% 5.3% 98%Copper, SHFE (CNY) 59290 2.0% -0.9% 12.1% 91%

Lead 2270 0.7% -0.8% -0.9% 68%

Nickel 21900 1.9% 3.2% 10.3% 120%

Tin 17550 0.6% -0.4% 5.5% 73%

Zinc 2307 1.2% -1.3% 2.0% 90%

Precious metals3)

Gold 1127.7 1.7% 1.9% 2.1% 23%

Silver 17.5 2.0% 2.8% 10.3% 37%

Platinum 1635.5 0.8% 2.3% 6.6% 56%

Palladium 473.0 2.4% 1.9% 8.6% 142%

Agriculturals1)

Wheat, LIFFE (EUR) 122.3 0.4% 5.6% -2.6% -12%

Wheat, CBOT 487.0 1.6% 3.7% -1.4% -12%

Corn 366.8 1.0% 3.5% 2.2% -6%

Soybeans 945.0 1.6% -0.5% -0.5% 4%

Cotton 81.8 1.3% 2.0% 8.9% 91%

Sugar 18.3 0.1% -7.3% -30.1% 39%Coffee Arabica 130.4 1.3% 0.1% -2.3% 20%

Coffee Robusta 1206.0 0.4% -1.1% -6.2% -21%

Cocoa 2858.0 0.4% 0.7% -7.2% 19%

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 4537775 0.6% 0.1% -1.1% 35%

COMEX 1767 0.0% 0.0% 0.0% -84%

Shanghai 387549 3.0% 7.6% 119%

Copper LME 528050 -0.6% -2.0% -4.0% 7%

COMEX 101875 -0.3% -0.3% -2.5% 129%

Shanghai 155469 4.6% 32.7% 348%

Lead LME 170300 -0.1% 0.0% 6.8% 188%

Nickel LME 158382 -0.1% -1.0% -3.9% 58%

Tin LME 23600 -0.7% -0.3% -9.9% 145%

Zinc LME 539700 0.2% 0.0% 7.6% 58%

Shanghai 223433 0.0% 0.1%

Precious metals ***

Gold 10011 -0.1% 0.4% 1.0% 15%

Silver 116632 -0.3% 6.1% 7.3% -7%

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

Palladium 630 0.0% -0.2% -0.1% 82%

Currencies 3)

EUR/USD 1.3767 0.7% 0.9% 1.3% 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

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GRAPH 1: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

5.56.0

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


2250

2300

2350

2400

2450

1M 8M 15M 22M



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

2150

2200

2250

2300

2350

1M 8M 15M 22Mactual oneweekago onemonthago

16500

16750

17000

17250

17500

17750

18000

1M 4M 7M 10M 13Mactual oneweekago onemonthago



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