Commodities: Under the spell of the OPEC (meeting) - Commerzbank

Barbara Lambrecht, Research Analyst at Commerzbank, suggests that oil prices are likely to tread water until the OPEC meeting at the end of this month, with hopes of production cuts offsetting news about excess supply.

Key Quotes

“Base metals markets are likely to continue correcting some more of their overheated price increases. Gold, on the other hand, should benefit from rising Asian buying interest after being under massive pressure from the firm dollar and increasing bond yields in recent weeks.”

“Hopes of a "forceful" production cut agreement have driven the price of Brent oil back into its old trading range between USD45 and USD50 a barrel, where it is likely to remain during the shortened US trading week (Thanksgiving). After all, news of abundant supply will be offset by "chances" of production cuts until the OPEC meeting at the end of November.” 

“Disillusionment is taking hold of the base metals market: The LME index has lost as much as 3% from its 15-month high reached last Thursday. Aluminium, which has since fallen by just over 4%, is likely to remain under pressure next week. The International Aluminium Institute could show that production will return towards previous record levels in China, but that it is also being raised in the rest of the world on the back of higher prices.” 

“Gold is one of the second half's major disappointments: The steep rise in the first six months to a 15-month high at the start of July was followed by an almost 10% price decline. At the moment, gold is being hit by the strong dollar and increasing bond yields which are weighing on investment demand. Asian demand, too, has been disappointing so far: According to estimates from the World Gold Council (WGC) Indian gold demand will drop to a 7-year low in the current year. At least recent import data from India are pointing to a strong recovery in October. Swiss gold exports are likely to show that lower prices amid fears of further depreciation also result in greater Chinese buying interest. We therefore believe gold will remain well supported by yearend, especially with most of the dollar's upside potential likely to be exhausted for now. At USD1,250 per troy ounce, gold is likely to end 2016 around USD200 higher than last year.”