Commodity Research Report Ways2Capital 19 September 2016


Posted September 19, 2016 by ways2capital

Gold fell on Monday as pressure from speculation over a potential increase in U.S. interest rates this month offset the metal's safe-haven appeal amid widespread weakness across other assets

 
MCX - WEEKLY NEWS LETTERS
✍ BULLION
Gold fell on Monday as pressure from speculation over a potential increase in U.S. interest rates this month offset the metal's safe-haven appeal amid widespread weakness across other assets. Spot gold was down almost 0.3 percent at $ 1,324.15 an ounce by 1400 GMT, with U.S. gold futures GC cv1 losing 0.5 percent to $ 1,328. A chorus of hawkish comments from Federal Reserve officials kept expectations alive for a September rate increase despite a recent spate of disappointing economic data. Stocks and bonds fell to levels last seen immediately after Britain's Brexit vote on concerns that global central banks' commitment to super-low interest rates and asset purchase programmes may be waning. After Boston Fed President Eric Rosengren spoke on Friday, the chances of a rate rise in September were seen at 30 percent, up from 24 percent before his comments. seems as if the risk-off sentiment has turned over the past couple of hours. The market might be putting more emphasis on the hawkish comments from the Fed," said Danske Bank senior analyst Jens Pedersen. Gold, often seen as a safe-haven investment in times of geopolitical and financial uncertainty, benefited from the risk-averse sentiment in early trade but later dipped into the red. "We think the Federal Reserve will indeed move in September, mainly on account of the timing of the upcoming U.S. election, coupled with the fact that, on aggregate, the economy is not as weak as most of the recent numbers suggest," Fed governor Lael Brainard is scheduled to give a talk in Chicago later on Monday, a day before the central bank's communications blackout takes effect in the build-up to next week's policy meeting. There is chance for some more volatility ahead with Brainard's speech, Hedge funds and money managers increased their net long position in COMEX gold contracts to a nine-week high in the week to Sept. 6 and also raised a bullish stance in silver, U.S. Commodity Futures Trading Commission data showed on Friday.

Gold prices inched higher for the first time in five sessions on Tuesday, as investors continued to weigh up prospects for future U.S. interest rate increases following the latest comments from Federal Reserve officials. Gold for December delivery on the Comex division of the New York Mercantile Exchange tacked on $ 2.25, or 0.17%, to trade at $ 1,327.85 by 8:50AM ET. A day earlier, futures shed $ 8.90, or 0.67%. In a speech on Monday, Fed Governor Lael Brainard warned against raising interest rates too quickly. The comments came after Boston Fed President Eric Rosengren said on Friday that low interest rates are increasing the chance of overheating the U.S. economy. Markets are pricing in a 15% chance of a rate hike at the Fed's September 20-21 meeting, For December, odds stood at around 55%. Gold is sensitive to moves in U.S. rates. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases. Also on the Comex, copper futures gained 0.6 cents, or 0.29%, to $ 2.106 a pound, as investors digested the latest round of Chinese economic data. China's factory output and retail sales grew faster than expected in August, easing concerns over the health of the world's second-largest economy.
Industrial production rose at an annualized rate of 6.3% in August, beating expectations for a 6.1% increase, the General Administration of Customs said on Tuesday.
Retail sales also handily beat expectations, with growth accelerating to 10.6% from 10.2% a month earlier, while fixed asset investment, which tracks construction activity, rose 8.1% last month, above forecasts for an increase of 8.0%. The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

✍ ENERGY
The global oil market will show a surplus into next year, as an abrupt deterioration in demand growth meets rising supply, pushing world inventories to yet another record high and confounding the previous expectations of leading energy agencies. The International Energy Agency on Tuesday forecast global supply would outpace demand well into next year, marking an about-face from its assessment just one month ago that the market would essentially show no surplus for the remainder of this year. Similarly, a monthly report from the Organization of the Petroleum Exporting Countries on Monday showed the world's largest producers expect their Non-OPEC rivals to pump even faster, suggesting a hefty surplus may be on the cards in 2017.
"Our forecast in this month's report suggests that this supply-demand dynamic may not change significantly in the coming months. As a result, supply will continue to outpace demand at least through the first half of next year," the IEA said. Global refinery runs are expected to grow at their slowest pace in at least a decade this year, which will curb appetite for crude oil, just as inventories across the OECD rose to a fresh record high of 3.111 billion barrels, the report said. "With our more pessimistic outlook for the second half of 2016 refining activity and revisions to crude supply, the expected draws in the third quarter of 2016 are now lower, while the build in the fourth quarter of 2016 is higher," the IEA said. Global demand growth is slowing at a faster pace than the group initially predicted. The IEA left its forecast for demand growth for 2017 unchanged from its prediction in June at 1.2 million barrels per day, but cut its forecast for 2016 consumption growth to 1.3 million bpd, from 1.4 million.
"The key demand change in this report is the erosion of 300,000 bpd from the third quarter of 2016's global demand estimate, and the resulting removal of 100,000 bpd from the net 2016 forecast," the IEA said.

Brent crude oil futures fell by around 2 percent on Tuesday to $ 47.30 a barrel, still showing a 70-percent gain so far this year, but about half where it was two years ago.
Despite oil's collapse and resulting investment cuts, global oil production is still expanding, although nowhere near the breakneck pace of 2015. High-cost OPEC producers have been hit particularly hard. However, the loss has been more than made up for by OPEC. Saudi Arabia and Iran have each raised oil output by over 1 million barrels a day since late 2014 when OPEC shifted strategy to defend market share rather than price. OPEC forecast demand for its oil will average 32.48 million bpd in 2017, down 530,000 bpd from its previous forecast. "It seems the situation has deteriorated strongly in the eyes of OPEC as well as the IEA,".Near-record OPEC output, and higher supply from outside, could make it harder for OPEC, led by Saudi Arabia, and rival Russia to come up with steps to support the market. Producers are expected to meet in Algeria on the sidelines of the Sept. 26-28 International Energy Forum.


Oil fell on Tuesday after a series of predictions on demand growth that pointed to the global overhang of unused inventories persisting for much longer than previously expected. The International Energy Agency said that a sharp slowdown in global oil demand growth, coupled with ballooning inventories and rising supply, means the crude market will be oversupplied at least through the first six months of 2017. That view marked a change from the agency's forecast a month ago, when it forecast supply and demand broadly in balance over the rest of this year and expected inventories to fall swiftly. The IEA's latest comments follow a surprisingly bearish outlook from OPEC on Monday. Brent crude was down 47 cents at $ 47.85 a barrel by 1340 GMT, with U.S. West Texas Intermediate futures declining by 70 cents to $ 45.59. "It seems the situation has deteriorated strongly in the eyes of OPEC as well as the IEA," said Commerzbank head of commodities strategy Eugen Weinberg.
"I wouldn't be surprised to see this price weakness continue for a while, because that was not on the cards, in our opinion." Upbeat Chinese data on industrial output growth for August failed to lift oil prices as the crude market remained in profit-taking mode, traders said. China's industrial output grew the fastest in five months as demand for products from coal to cars rebounded thanks to higher government spending and a year-long credit and property boom. Speculators in U.S. and Brent crude futures took an axe to their long positions in the latest week, cutting the combined net speculative length in the two contracts by 80 million barrels, according to PVM Oil Associates. "Given the bearish fundamental backdrop, yesterday’s strength is not expected to be long-lived. Maybe this is what we are already seeing this morning with the two main crude oil futures contracts trading ... lower," PVM Oil Associates strategist Tamas Varga said in a note. "As for today and tomorrow, all eyes will be on the weekly statistics on U.S. oil stocks to see whether last week’s huge fall in crude oil inventories was just a one-off." U.S. crude inventory data is due on Tuesday and Wednesday. A Reuters poll forecast that U.S. commercial crude oil stocks are likely to have risen last week after marking the largest plunge since 1999 in the previous week.



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Last Updated September 19, 2016