Commodities were mixed amidst weak investor appetite - ANZ

Commodities were mixed, with the rally in energy markets petering out amidst weak investor appetite as the market looks ahead to this week’s FOMC meeting notes analysts at ANZ.

Key Quotes

 “Crude oil prices struggled to move higher as investors took stock after the weekend’s non-OPEC production cut agreement. Investors are now starting to focus on the reaction from high cost producers in light of higher prices. The International Energy Agency predicts US shale output will rise next year. However, it also suggested the market will move into a sizeable deficit in H1 2017 and drain stockpiles relatively quickly. Saudi Arabia also appears be protecting its most important market, Asia. While it has notified customers in Europe and the US about reductions in sales in 2017, Asian customers have largely been spared.”

“Industrial metals prices were mixed, with aluminium and nickel leading the gains. Inventories of aluminium held on the LME fell the most in a decade and now sit at only 2.07 million tonnes. This is down 62% since the start of 2014. However, risks remain with China output hitting a record high 2.8 million tonnes in November. This has spurred higher exports onto the international market.”

“Iron ore prices treaded water as steel prices in China hit a lull. Coking coal contract prices for 2017 were set after Nippon Steel and Glencore agreed to set Q1 2017 contract volumes at USD285/t. It’s the highest contract prices since Q4 2011 and up from USD200/t in the current quarter. This reflects the tightness in the seaborne market after China slashed domestic capacity earlier this year.”

“Gold was little changed as investors remained focused on this week’s FOMC meeting.”