Commodities: Struggled as fundamental issues weighed - ANZ

Analysts at ANZ note that commodities struggled in the previous session as fundamental issues weighed on the respective markets.

Key Quotes

“Crude oil prices fell as increased drilling in the US and a rebound in Libyan output weighed on investor sentiment. Libyan output rose to about 660kb/d, according to a report in Bloomberg. Production had fallen to 500kb/d after the closure of the Sharara field last week. The concern about rising output outweighed the perception of tightening markets. OPEC Secretary-General Mohammad Barkindo said he was cautiously optimistic that the market is already rebalancing. Investors were also nervous about another strong rise in the rig count in the US. Baker Hughes data showed the number of rigs rose for an eleventh successive week to 662.”

“Base metals prices fell across the board on the back of a slightly stronger USD and weak economic data. US auto sales, a key driver of metals demand, fell heavily in March, with heavy discounts failing to lift customer buying. Inventory of unsold vehicles is also at a ten-year high. The closure of Chinese markets meant little direction for investors in the Asian trading session.”

“Iron ore prices fell slightly, ending the day just below USD80/t. Reports suggest traders are now concerned about the physical capacity at ports and their ability to hold any additional iron ore if the current pace of increases continues.”

“Coking coal prices broke their eerie silence as news broke of extensive disruptions to coal rail infrastructure in Queensland. Prices jumped over 15% as traders rushed to secure supply ahead of what looks like an extensive outage. At this stage, it appears inventories at the coal operations are also high, meaning the ability of producers to continue to mine is limited as well. Given infrastructure was already a bottleneck in the system, the ability to catch up over the coming months when the rail network is repaired could also be restricted. With a significant amount of the world’s premium hard coking coal now marooned onsite, prices are likely to continue to push higher.”

“Gold rose as the lower than expected auto sales in the US seemed to spur expectations of a more dovish Fed. This was despite a slightly stronger USD. Investors are also becoming more bullish. CFTC data showed gold bulls increased their net-long position in gold futures to the most in more than 11 weeks. This increasing bullishness has been fuelled by increasing signs of a weakening Trump trade.”

“Agriculture markets were slightly weaker, with moves in currency markets resulting in some investor selling. Soybeans remained under pressure on the back of higher acreage and stocks in the US.”