Month: July 2020

Copper prices have climbed nearly $3 a pound, to their highest in 2 years, gaining support from the recovering demand, as more global economies and industries restarted following the pandemic crisis, in addition to the robust Chinese industrial demand, and the supply disruptions in Chile.

China, which consumes nearly 50% of the global demand for copper, increased its imports to a record high in June, a sign of a recovering industrial activity after the removal of the virus-related lockdown measures in early April.

Furthermore, copper prices have received support from supply disruptions in Chile, the world’s biggest producer of the red metal. Some major copper mines suspended their operations to stop the spread of coronavirus, while miners in other sites in the country voted for strikes on wages and virus protection.

Copper futures for September delivery trade near $2.87 a pound on the Comex metals division of the New York Mercantile Exchange, jumping almost 50% since March 19, when prices hit 2020-intraday bottom. The prices have completely recovered all pandemic-related losses together with the US-China trade war losses from 2019.

Downward pressure on copper prices

The recent rally has lost some steam since the start of the week, over concerns that the demand for the industrial metals could be affected amid the escalation of US-China tensions, the resurgence of COVID-19 cases around the world and the doubts over the resilience of China’s economic recovery.

The US-China relations deteriorated after Trump’s administration ended Hong Kong’s special status under US law in response to China’s new security law against the former British colony. The renewed tension is raising the risk of a new round of economic retaliation between the world’s two largest consumers of industrial metals.

Commodity Update, Thursday, 16th of July, 2020

The energy market has been dominated this week with headlines over the OPEC decision for the output cuts, the oil demand outlook, the fear for the second wave of infections, and hopes rising for a coronavirus vaccine.

WTI and Brent crude oil prices climbed near 4-month highs of $41 and $44 per barrel respectively on Wednesday, recovering by more than 300% from their historic lows of around $10 per barrel in April due to the global lockdowns to contain further spread of the pandemic.

Both oil prices hit intraday highs yesterday after the American Energy Information Administration showed a larger-than-expected drawdown in crude oil, gasoline, and distillate inventories for last week, signaling an improvement in US fuel demand, coupled with lower imports of crude from Saudi Arabia.

Furthermore, oil prices were boosted after the OPEC group improved its oil demand outlook for 2021 in response to global economic recovery and the positive news over a potential coronavirus vaccine.

However, the price rally was capped after the OPEC group and its allies led by Russia decided on Wednesday to roll back the record output cut of 9.7 million barrels per day to 7.7 million, starting from August, as the global economy slowly recovers from the pandemic.

Finally, the resurgence of coronavirus infections in the US and other countries and the re-imposition of lockdowns in some places around the world could limit the global oil demand recovery.

The Organization of the Petroleum Exporting Countries (OPEC) expects an increase in crude oil demand to soar by a record of 7 million bpd in 2021 to 97.7 million bpd, in response to the global economic recovery following the COVID-19 pandemic.

While the 7 million bpd is expected to mark the largest one-year jump ever recorded, it’s significantly below the already lukewarm demand figure of 99.8 million bpd recorded at the end of 2019, pre-coronavirus.

In its monthly report for July, OPEC anticipates that the current downside risks such as a second wave of COVID-19 infections, geopolitical tensions and financial risks would not limit the growth in oil demand for next year.

OPEC assumes that the pandemic would be contained in major oil consuming countries, allowing the recovery of social and economic activity in pre-pandemic levels, increasing the personal consumption and investments which will eventually increase the demand for petroleum products.

OPEC’s anticipations for 2020:

The organization expects that the global crude oil demand will fall by 8.95 million bpd in 2020, slightly improved from the expectation of 9.1 million bpd in the previews month’s report.

Furthermore, it expects a decline in oil supply outside OPEC of 3.26 million bpd, mainly from the shale oil industries in the US and Canada, the deep water oil production in Norway and Brazil, while it expects an increase of only 0.92 million bpd in 2021.

Crude oil prices:

Crude oil prices jumped 300% in the last 3 months, recovering most of the massive losses occurred during the COVID-19 pandemic crisis in March and April when oil demand fell by 30% amid lockdown measures. Both WTI and Brent crude oil prices have hovered in the $38-$45 per barrel range since early June, well above their multi-year lows of $10-$15 per barrel.

From May 2020, OPEC and allies led by Russia have been cutting output by 9.7 million bpd, or a 10th of the global demand, helping prices to recover from their historic lows.