Commodity update 75

The oil prices dropped significantly at the beginning of the week. Brent still remains above the price level of USD 50, WTI already fell below. At the beginning of 2017, Brent noted over USD 56 and WTI approximated to USD 55.

In the recent past, Commerzbank analysts doubted the persistence of those high price levels, since the expectations of a supply shortage have been priced in. However, neglecting the polls of the OPEC members, there are no indications of a supply shortage. Above all, the US production rose to new record levels. Currently 617 boreholes are established and hence 100 more than at the beginning of the year.

According to commodity analyst Eugen Weinberg, the price could keep falling even about USD 15 from now, if markets distrust the OPEC’s official production statements.

Gold participates from a weaker US-Dollar

Gold continued its recovery and rose above the USD 1,200 level again. Forecasting the US labor market report, the price temporarily fell to USD 1,195. However, since the Dollar remained relatively low, gold was not affected substantially.

Despite of a solid employment rate, the Dollar declined. This decline is mainly caused by a relatively strong Euro, which results from a possible raise in interest rates before a termination of the bond purchase program.

China announces to reduce its aluminum production

With respect to the air pollution in several Chinese provinces, prime minister Li Keqiang affirmed the intention to significantly reduce the basic industry’s pollution emission. Following Achim Wittmann for Landesbank Baden-Württemberg, especially sectors which state overcapacities such as coal, steel and aluminum may be affected. In single provinces such as Henan, Shandong, Shanxi and Hebei the aluminum capacities shall be reduced about 30 percent during the winter months 2017/ 2018. The accumulated production of these areas amounts to 11 million tons.

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