Commodities Update 23
Oil and gold prices still under pressure; China struggles with high corn stocks
Oil prices are still weak in expectation of the OPEC-Meeting on 4th of December. An upcoming Fed hike, the strengthening Dollar and the weak global economy, especially in China, have recently pressured oil prices.
It might be in the interest of Saudi-Arabia to continue their expansionary strategy in order to keep the pressure on oil prices and to increase the pressure on inefficient oil producers. In 2016, market forces might be stronger on the supply side, which could induce a movement towards the equilibrium, according to Frank Klumpp, Analyst at LBBW.
Natural Gas is also close to oversupply. Stocks have increased by 13.8 percent compared to last year and are 6.3 percent higher than the five-year-average.
Precious metal prices still suffer from the strong US-Dollar. Gold prices decreased to 1,052 US-Dollar last Friday, but recovered on Monday. Ole Hansen, Saxo Bank, predicts first a decrease to 1,000 US-Dollar per ounce and then a recovery to 1,250 US-Dollar per ounce by the end of next year.
Prices for corn have reached 359 US-Cents per bushel on Monday. Corn stocks are especially high in China. Therefore the government decided to lower corn prices in China about 10 percent. This would still be significantly higher than the worldwide average, but should induce higher demand and less supply. On Monday, the Food and Agriculture Organization of the United Nations pointed out that natural catastrophes have nearly doubled since the 1980s. An increase of agricultural prices would be inevitable if the climate change is not being slowed down. This could be in favor of corn prices.