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Oil costs signalling a deeper secular decline in commodity markets? – Westpac

David Goodman, analyst at Westpac, means that the worldwide commodity outlook has been clouded by the affect of tariffs, slowing world development, weaker Chinese language development, the stronger US$, rising manufacturing and inventories.

Key Quotes

“For crude markets, the spike in October to over US85/barrel was pushed by provide fears (US sanctions on Iran, Venezuela provide disruptions, restricted spare manufacturing capability), nevertheless the latest sharp falls in crude markets have been simply as putting. Whereas positioning was clearly an element behind latest weak point, we be aware the US is now the world’s largest producer of crude and this has modified the worldwide provide stability.”

“US Permian manufacturing has come to market a lot sooner than many thought and a wave of pipeline capability coming on-line subsequent yr will convey this crude to market that means that OPEC+ may have their work lower out to take care of worth stability. Nonetheless, it appears truthful to argue although that the weak point in crude/ nickel/ lead and zinc have been pushed extra by idiosyncratic components moderately than by secular forces.”

“Even after the latest drop, iron ore & coking coal costs are nonetheless up on a 6m annualised foundation; LNG & thermal coal costs solely modestly decrease. The drivers of crude are usually not essentially the drivers of commodities basically.”


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