Latest news with #OleHansen
Mid East Info
a day ago
- Business
- Mid East Info
Commodities weekly: metals and softs rise in August as energy and grains slide
Ole Hansen, Head of Commodity Strategy, Saxo Bank Macro overview August has so far been shaped by a tug-of-war between supportive supply-side stories in parts of the commodity market and macro headwinds from weakening economic data in the US and around the world. The latest US inflation data, in the form of a hotter-than-expected July PPI, forced markets to recalibrate their Fed expectations. Just a day after Scott Bessent, the Secretary of the Treasury, called for an aggressive 150 bp rate cut, the data cooled talk of a jumbo move in September, with the market now firmly pricing in a modest 25 bp reduction. US 10-year Treasury yields nevertheless have edged lower during the month, with the 2-year tenor falling the most amid the mentioned prospect of incoming rate cuts and expectations the next chair of the Federal Reserve replacing Jerome Powell early next year will be much more inclined to argue for the cuts so desperately sought by President Trump and Bessent. Following a brief period of strength last month, the US dollar has resumed its broad decline with notable weakness seen against its major peers, led by GBP, JPY, and EUR. This combination—lower yields and renewed dollar weakness—has so far this month helped underpin non-yielding investment assets such as metals; however, with silver, platinum, and copper seeing most of the demand as gold remains well and truly stuck midrange waiting for the next catalyst. Overall, from a position of recent strength, US economic data has started to show signs of weakness, joining other economies with global PMIs pointing to slowing momentum in parts of Europe and Asia. Friday's data dump from China showed an across-the-board slowing economy in July, suggesting an impact from Beijing's crackdown to curb overcapacity in businesses from steel to solar and EVs, extreme weather, and spillovers from Donald Trump's tariffs. The oil market remains fixated on the interplay between demand downgrades and OPEC+ supply policy, while in agriculture, the latest WASDE report triggered sharp moves in the grains complex. Soft commodities, led by coffee, have been the standout winners thanks to idiosyncratic weather and policy drivers. Commodity sector snapshot The Bloomberg Commodity Total Return Index is down around 1% month-to-date, reducing the year-to-date gain to just 4%, with strength in softs, industrial metals, and precious metals offset by losses in grains and, most notably, the energy sector. Softs have outperformed on weather concerns, low exchange inventories, and policy uncertainty in key producing nations. Industrial metals have been supported by fading tariff concerns and a copper supply disruption in Chile, while an environmental disaster at a China-owned mine in Zambia underscores the challenges of securing the minerals needed to meet rising power demand, with copper as the key conductor. Precious metals, as mentioned, have seen silver and platinum outshone rangebound gold, not least due to their industrial linkage and a tightening supply outlook. On the downside, grains, led by corn and wheat, came under pressure from the USDA's projection of a record US corn crop, while energy suffered from a combination of downgraded demand growth, rising inventories, and OPEC+ continued unwinding of production cuts into what could become an oversupplied market. Energy: rising supply and macroeconomic headwinds Crude oil prices have struggled in August, with Brent and WTI both down more than 7% and trading near two-month lows. The International Energy Agency's latest report cut its demand growth forecast for 2024, citing weaker industrial activity and slower transport fuel consumption. At the same time, OPEC+ has reaffirmed plans to fully unwind its voluntary production cuts by September, bringing barrels back into a market that has started to show signs of a surplus. However, it is worth noting that only a relatively small part of the 2.5 million barrel increase that the eight OPEC+ members have agreed to has so far been delivered. Partly due to restraint from producers that exceeded their quotas in recent months, while some producers have struggled to increase output, and finally due to strong summer demand among producers reducing what was available for exports. In addition, prices have held up relatively well due to concerns about secondary sanctions on Russian supply and Chinese stockpiling, which according to the IEA, built by around 900,000 barrels per day in the second quarter. US and OECD commercial inventories have risen, refining runs are seasonally high, and product cracks—especially diesel—have softened. With backwardation narrowing, the market is signalling less concern over near-term supply tightness. The geopolitical risk premium tied to the Trump–Putin meeting in Alaska is now a secondary driver, and unless talks break down sharply, the macro drag from the demand outlook may keep a lid on rallies, with Brent potentially struggling above USD 70 per barrel. Notoriously volatile US natural gas is one of the weakest performers this month, down more than 8%. Storage injections continue to outpace the five-year average, leaving inventories 6.6% above normal levels for this time of year. Without a significant late-summer heatwave or major hurricane disruption to Gulf Coast production, the ample storage cushion will limit upside, though weather-driven volatility could reassert itself quickly. Precious metals: silver outshines gold Gold initially traded lower after a stronger-than-expected US PPI print, on speculation it may dampen rate cut expectations by pointing to a potential upside in July's Core PCE inflation, likely keeping the Fed cautious. Rising producer input costs risk either squeezing company margins or being passed through to consumers, adding upward pressure on CPI. However, the data does not change our long-held bullish view on gold, as the FOMC will ultimately have to balance inflation control with economic support. For now, however, gold remains well and truly stuck in a USD 200 range centred around USD 3,350. Still, underlying ETF demand remains firm, rising to a two-year high at 2,878 tons (Bloomberg), suggesting that the market's longer-term bullish narrative—built around eventual Fed easing and lingering stagflation risks—is intact. The near-term focus will be on the July Core PCE release and its implications for September's FOMC meeting, and also the annual gathering of central bankers at Jackson Hole from 21–23 August. Silver has outperformed gold this month, up close to 4%, aided by its dual role as a precious and industrial metal. Stronger industrial demand expectations, and the prospect for a tightening supply outlook, combined with technical buying as the gold–silver ratio drifts towards last month's low near 86, have supported prices. The market remains sensitive to shifts in global manufacturing data and the USD path, but silver retains more upside beta than gold in a softening dollar environment. From a technical perspective, USD 35 remains with sustained break above USD 38.50 needed before the attention turns to the psychological level at USD 40. Industrial metals: policy noise fades, fundamentals regain focus Copper has steadied after July's tariff turmoil, which saw US prices slump relative to London as traders reacted to the prospect of tariffs on key forms of imported refined metal. Clarifications and partial exemptions have helped narrow the Comex–LME spread, shifting attention back to fundamentals. China's latest trade data hinted at some stabilisation in imports, while mine supply issues in South America remain on the radar. Grains: WASDE reshapes the landscape The USDA's August WASDE report jolted the grains market. Corn futures dropped sharply to contract lows after the agency projected a record 16.7 billion bushel harvest, driven by expanded planted acreage and favourable summer weather. Higher ending stocks forecasts reinforced the bearish tone, and the futures curve has shifted to a more comfortable carry structure, which inadvertently supports speculators already holding an elevated net short position. Soybeans moved in the opposite direction, supported by a smaller-than-expected crop estimate and tighter balance sheet. While gains have been modest compared with the sell-off in corn, the market is holding a risk premium into the South American planting season, where early weather developments will be key. In addition, ongoing trade talks with China remain on the radar, not least after President Trump urged China to quadruple their purchase of US-produced beans. Wheat followed corn lower, also hitting a contract low, with ample global supplies—particularly from the Black Sea and Europe—keeping export competition intense. Quality concerns in parts of Europe have provided some localised support, but not enough to offset the overall bearish supply picture, which in the short term could lead to lower supply as farmers, frustrated with low prices, hold back supplies. Softs: coffee takes the crown Arabica coffee is the clear standout in August, rallying more than 10% month-to-date. The move has been driven by a combination of Brazilian weather concerns, low certified exchange stocks, and some tariff-related uncertainty adding to speculative interest. The market remains sensitive to shifts in Brazil's weather outlook and export pace. Sugar has also posted modest gains, underpinned by policy uncertainty in India, where decisions on export quotas could tighten global supply. Output from Brazil's Centre-South region has been robust, but the balance between strong production and export restrictions elsewhere is keeping prices supported.
Mid East Info
2 days ago
- Business
- Mid East Info
WASDE projects record corn crop, tighter soybeans, wheat under pressure – Saxo Bank - Middle East Business News and Information
Ole Hansen, Head of Commodity Strategy – Saxo Bank The latest USDA World Agricultural Supply and Demand Estimates (WASDE) report delivered a jolt to U.S. grain markets on Tuesday, triggering sharp price moves across corn, soybeans and wheat. The report's most significant surprise came in corn, where updated forecasts pointed to an even larger harvest than traders had anticipated, while soybeans moved in the opposite direction on a smaller crop and tighter supplies. Wheat, meanwhile, tracked corn lower as global abundance kept pressure on the market. In corn, USDA raised its production estimate to a record 16.742 billion bushels, nearly 5% above the average trade forecast, on a yield of 188.8 bushels per acre and increased acreage. The result was a steep jump in projected ending stocks by this time next year to 2.117 billion bushels, up from both expectations and last month's forecast. The market reaction was swift: December corn futures fell 3.3% to $3.92 per bushel, marking a fresh contract low. The sheer size of the crop has deepened the market's contango structure, where deferred futures trade above spot prices to reflect storage and financing costs. In an oversupplied market, this carry can widen further and for speculators holding short positions, this environment offers an added advantage. As contracts roll forward, higher-priced deferred months tend to converge toward the lower spot price, creating a positive roll yield that can supplement outright price declines. As an example the December 2026 future currently trades 49 cents above the December 2025 contract, reflecting an annualised roll yield for holding a short position of around 12%. Overall, months of price weakness has driven the sector to a multi-year low in the process supporting the mentioned short selling trade by speculators, not only in corn but also at times in soybeans, and not least wheat where hedge funds have maintained a net short position for a record period of 37 months. Soybeans told a different story. Production estimates were cut to 4.292 billion bushels, nearly 2% below expectations, as reduced acreage more than offset a modest yield increase to 53.6 bushels per acre. Ending stocks were lowered to 290 million bushels, almost 15% below the market's forecast. The tighter balance sheet lifted November soybeans by 2.1% on the day, reversing earlier losses. Wheat offered few surprises in the U.S. balance sheet, with production little changed at 1.927 billion bushels and ending stocks only slightly below expectations. However, global supply remains abundant, with world ending stocks in line with forecasts at 261.6 million tons. December Chicago wheat futures fell 1.8% to $5.2375 per bushel, also touching a contract low, underlining the heavy influence of international supply flows from the Black Sea, Europe and Australia. Looking ahead, several factors could still shift the post-WASDE picture. South American planting and early-season weather will be closely monitored, particularly in Brazil and Argentina, where adverse conditions could tighten global soybean supply and indirectly lend support to corn. In the U.S., harvest results could challenge or confirm USDA's lofty yield projections, especially for corn, while developments in Chinese buying patterns or trade policy could quickly alter demand expectations. Other wildcards include biofuel margins, which affect both corn and soybean demand. For now, the WASDE has set a clear narrative: an even bigger U.S. corn crop weighing on prices, soybeans finding support from a tighter balance sheet, and wheat still under pressure from global surplus. The contango structure across grains reflects the market's comfort with near-term supply—but as harvest progresses and weather patterns shift, that confidence may yet be tested.
Mid East Info
5 days ago
- Business
- Mid East Info
COT Report: Speculators slash commodity longs to 11-month low, gold remains dominant
Ole Hansen, Head of Commodity Strategy, Saxo Bank Commodities In the week to August 5, several major developments drove positioning changes across key commodities. Trump's abrupt reversal on copper tariffs triggered a 22% slump in New York prices, prompting funds to halve their HG copper net long. In energy, OPEC+'s continued production increases—potentially into a softening demand period—pressured crude oil, while fading tightness in the diesel market led to long liquidation in London and New York from recent three-year highs. Grains remained under pressure as favourable U.S., European, and Black Sea weather maintained strong crop prospects, reinforcing elevated speculative short positions across wheat, corn, and soybeans. Notably, soybean futures jumped 2.5% in early Monday trade after Trump urged China to quadruple U.S. soy purchases as part of efforts to cut its trade deficit with China. As of late July, US government data showed China, the world's top buyer of soybeans, had yet to book any cargoes for the upcoming season that starts in September as tensions between the two sides linger. Overall, managed money accounts engaged in broad-based selling, with most of the 27 major commodity futures tracked seeing net reductions. The combined net long fell to an 11-month low of 540,000 contracts, valued at USD 107 billion. More than half of this nominal value came from gold's 161,811-contract net long—which, in contrast to the broader trend, rose 13% last week as a weaker-than-expected U.S. jobs report and potential dovish shift from the FOMC boosted September rate-cut expectations. Forex Despite emerging signs of the recent dollar recovery had run out of steam, speculators extended their recent buying spree to six leading to a considerable amount of further dollar short-covering. Overall, the gross USD short versus eight IMM forex futures slumped by 38% to USD 7.1 billion, the lowest belief in a weaker dollar since April, with selling seen across all eight except the Mexican peso, and led by JPY, EUR and not least GBP after the net short jumped to near a three-year high. Another extreme emerged in AUD where the net short reached an 18-month high.
Mid East Info
08-08-2025
- Business
- Mid East Info
Tariff shock sends gold futures soaring – yet spot market holds the real signal – Saxo Bank - Middle East Business News and Information
Ole Hansen, Head of Commodity Strategy, Saxo Bank Gold futures on the COMEX exchange in New York soared overnight relative to the London spot price after an article in the Financial Times suggested the US would now—counter to expectations—apply tariffs on imports of 1 kg and 100 oz bars adding a fresh blow to Switzerland, the world's largest refining hub. One-kilo bars are the most common form traded and accepted into vaults monitored by the COMEX exchange, and Switzerland is often used as the refining hub between the London bullion market, which generally trades in 400-ounce bars (12.44 kg), and the smaller sizes mostly traded and accepted in the US market. It's worth noting that the US futures market is often used by bullion banks globally as a highly liquid, around-the-clock hedging tool for transactions in the physical bullion market. This is the main reason why we're once again seeing the spread—reflected in the exchange for physical (EFP)—widen sharply, as short positions originally intended as hedges suddenly blow up. In the short-term the main driver has been short-covering and once that is completed the premium may ease back a bit. We saw similar dislocations during COVID, when the transatlantic bullion supply chain briefly stalled, and again earlier this year amid speculation that Trump's tariffs might include precious metals. For now, it's worth watching whether another 'TACO moment' will emerge. If not, the spread may need to settle at a new level that reflects the tariff landscape. In parallel, much like the recent events in the NY copper market, these developments raise serious questions about the ability of the NY futures markets to offer a stable and trustworthy trading environment that offers the best price discovery—one that increasingly appears vulnerable to being hijacked by Trump's shifting tariff agenda. The December futures (GCZ5), the main traded contract on COMEX, hit a fresh record high overnight at USD 3,534, with the premium above the London spot blowing out to more than USD 100 from around USD 40 this time last week. All developments that—for now—solidify the London spot price (XAUUSD) as the most reliable source telling us what the real value of gold is. Do not look at technical breakouts in the futures market as the price action is currently taken hostage by movements in the EFP. What counts is what the spot price is doing, and it remains stuck in a range since April, with a break above USD 3,450 needed to change that. Also supporting silver and platinum early in the month was a surge in High-Grade copper prices in New York, which hit a record $5.8955/lb on July 8. This followed President Trump's surprise suggestion of a 50% tariff on copper imports—double what markets had priced in. The remark drove the premium over LME copper in London to a record 34%, sparking a rush to ship copper into the U.S. ahead of the deadline. That trade unraveled last week when Trump, in a sudden reversal, announced that refined copper—traded on futures exchanges—would be excluded from the tariff until at least January 2027. The New York premium collapsed within minutes, leaving traders nursing losses and U.S. warehouses with copper inventories at a 21-year high. With imports set to dry up, U.S. prices may now fall below global benchmarks to clear the excess.
Mid East Info
07-08-2025
- Business
- Mid East Info
Crude oil caught between supply surge and geopolitical tensions – Saxo Bank - Middle East Business News and Information
Ole Hansen, Head of Commodity Strategy, Saxo Bank The global crude oil market continues to navigate a complex web of supply pressures and geopolitical crosswinds, with prices holding up surprisingly well despite expectations of an emerging supply glut once the peak summer demand season comes to an end, driven by rising OPEC+ output and fading global demand growth amid tariff-related demand concerns. Brent crude is currently trading just below USD 70 per barrel, after recently being rejected above USD 70, overall leaving prices stuck near the middle of the wide sub-60 to just above 80 range seen during the past year. Yet, persistent geopolitical risk and tightness in the refined products market, especially diesel, are helping to support prices for now. While the crude oil futures, both Brent and WTI, trade down around 8% year-to-date, the current backwardated forward curve structure has rewarded investors holding long futures positions, which on a monthly basis is rolled from a higher-priced contract into a lower-priced deferred. Taking this into account, the total return in Brent and WTI is currently flat on the year, with the two diesel contracts offering the only positive return at this stage. Opposite to this positive carry providing tailwinds, the complete opposite situation is seen in natural gas, where higher prices in the future—currently 29% in a year's time—continue to attract short sellers, preventing the price from gaining ground while making it exposed to selling during periods, like now, where fundamentals struggle to support. OPEC+ supply push vs. demand uncertainty Crude prices trade higher today following a four-day slump after traders digested another bumper production increase from a group of eight OPEC+ producers. With the 2023 voluntary cut of 2.2 million barrels per day now fully reversed, traders ponder what the wider group might do with a 1.66 million barrels per day cut that was also implemented that year. So far, the group's quest to regain market share from other producers has been successful, with prices holding up very well amid strong summer demand, and emerging signs high-cost producers, especially in the US, are pulling back with production seeing no growth for the past 18 months, currently stuck around 13.3 million barrels per day. With OPEC+ prioritising market share through rising production keeping prices relatively low, thereby tipping the market into surplus, growth concerns in the US and China—exacerbated by protectionist policies and weakening trade flows—are putting a lid on consumption forecasts. A recent deterioration in US economic data, most notably last week's dismal jobs report and yesterday's ISM Services data, which showed firms are pulling back on hiring as costs rise, adds to broader macroeconomic unease, with stagflation concerns once again receiving a great deal of attention. Secondary sanctions threaten Russian exports Among the most significant bullish catalysts in recent days is the prospect of expanded US secondary sanctions targeting countries that continue to import Russian crude. President Trump has pledged to escalate penalties, raising tariffs on Russian oil buyers from 25% to potentially 100%, with India as a primary target. These threats are already having an impact. Indian refiners are reportedly re-evaluating their Russian crude purchases, which could lead to significant disruptions. India has emerged as Russia's largest crude customer since 2022, taking in around 2 million bpd. A meaningful drop in Indian demand for Russian oil would leave a large gap in the market and potentially tighten global supply, keeping prices supported. Thus, the geopolitical risk premium remains—for now—a strong counterweight to OPEC+ supply growth. Diesel market tightness lends support Adding to the price resilience is the continued tightness in global diesel markets. Inventories across key hubs—including the US, Europe, and Singapore—remain roughly 20% below their 10-year seasonal averages. The shortfall is linked to a combination of factors: reduced Russian diesel exports due to sanctions, limited refining capacity, and lower availability of medium-to-heavy crude grades suitable for diesel production. With industrial activity and transportation demand peaking in the Northern Hemisphere summer, refiners have struggled to keep pace. This refined product tightness has helped maintain healthy crack spreads and indirectly buoyed crude oil demand, particularly for grades optimised for diesel yields. Speculators have responded accordingly and recently held net long positions in ICE gas oil and New York ULSD (Ultra-light Sulphur Diesel) near three-year highs. A potential risk once inventory levels normalise, potentially triggering a bigger-than-expected correction as longs are forced to exit. Brent holding up—but for how long? The current pricing structure—with Brent trading near USD 70—stands in stark contrast to forecasts calling for a substantial supply surplus later this year. With OPEC+ bringing more barrels to market and non-OPEC supply remaining robust, fundamentals appear increasingly skewed to the downside. Still, the market seems willing to look past the approaching glut in favour of nearer-term risks tied to geopolitics and product shortages. In effect, the market is balancing short-term threats against medium-term oversupply, resulting in a surprisingly firm price floor—at least for now. U.S. Natural gas slides back below USD 3. Meanwhile, US natural gas futures have come under renewed pressure. The front-month Henry Hub contract dropped back below USD 3 per MMBtu for the first time since April, hovering near the year-to-date low of USD 2.85. The decline reflects a persistent oversupply, with domestic production remaining robust and storage levels now 6.7% above the five-year average. Weather forecasts pointing to cooler-than-normal conditions in mid-August have added to the bearish mood by signalling softer air-conditioning demand. From a technical perspective, the front month contract trades near support with the mentioned year-to-date low at USD 2.85 being joined by USD 2.80, the 61.8% Fibonacci retracement of the rally from the 2024 lows to the 2025 highs.
