Commodities
Copper prices hit record highs, here’s what Morgan Stanely sees as a bull case
Investing.com– Copper prices are set to see some near-term volatility after surging to record highs in recent sessions, Morgan Stanley analysts said in a note, although the red metal is still expected to push higher this year.
A mix of strong demand-supply fundamentals and outsized speculative trading drove stellar gains in over the past few sessions, putting prices at lifetime highs.
Bulls expect copper demand to increase in the coming months amid a greater global push into green energy and electrification, and that copper mines will be unable to meet this increased demand.
This notion was a key driver of copper gains, and also triggered a short squeeze on the Comex, which furthered copper’s rally. on the London Metal Exchange hit a record high of $11,101.50 a ton on Monday.
But copper prices fell sharply from these records on Tuesday, with MS analysts stating that the red metal was set for some near-term volatility after the abrupt gains.
Still, they expect the red metal to rally further in 2024, and presented a bull case of $13,125 a ton for LME copper, along with a base case of $10,500 a ton.
MS analysts said the physical copper market was likely tighter than initially anticipated, especially amid low U.S. inventory and staggered China shipping.
The growing popularity of artificial intelligence, and the industry’s large energy requirement is also expected to drive up copper demand. Copper plays a key role in electricity transmission infrastructure.
“We remain bullish on copper as persistent supply challenges widen our deficit for 2024,which looks set to persist into 2025. Demand and narrative tailwinds from data centres/AI should also boost participation, with long positioning rising,” MS analysts wrote in a note.
China is the world’s biggest copper importer, and is expected to see an economic rebound in 2024 on sustained stimulus support from Beijing. Such a scenario is expected to push up the country’s appetite for copper, although weakness in the property market may limit its demand.
Investing.com — Oil prices settled lower Friday, ending the week with a loss as weaker U.S. nonfarm payrolls stoked concerns about an economic-led slowdown in crude demand.
At 2:30 p.m. ET (1430 GMT), the futures (WTI) traded fell 2.1% to settle at $67.67 a barrel, while contract fell 2.2% to $71.06 per barrel.
U.S. economic slowdown worries resurface after weak jobs report
The US economy added fewer jobs than anticipated in August, but rose from a sharply revised July figure, according to Labor Department data that could factor into the Federal Reserve’s next policy decisions.
Nonfarm payrolls came in at 142,000 last month, up from a downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, up from the initial July mark of 114,000.
Following the release, bets that the Fed will introduce a deeper 50 basis-point rate cut — rather than a shallower 25 basis-point reduction — increased.
Concerns about the demand come just a day after OPEC+ said it had agreed to postpone a planned increase in oil production for October and November.
U.S., Europe working on Iran sanctions
Geopolitical tensions ratcheted up on Friday after the U.S. and Europe they were working on sanctions to impose on Iran after the Tehran sent missiles to Russia.
The U.S. had previously warned Iran about transferring missiles to Russia, saying it would represent a major escalation in Iran’s support of Russia’s war against Ukraine.
(Reuters) – Goldman Sachs adjusted its expectations for OPEC+ oil production saying it now expects three months of production increases starting from December instead of October, the bank said in a note on Friday.
OPEC+ has agreed to delay a planned oil output increase for October and November, the producers group said on Thursday after crude prices hit their lowest in nine months, adding it could further pause or reverse the hikes if needed.
However Goldman Sachs maintained its range of $70-85 per barrel and a December 2025 Brent forecast at $74 per barrel.
The investment bank expects the effects of a modest reduction in OPEC+ supply in the upcoming months to be counterbalanced by easing effects from the current softness in China’s demand and faster-than-expected recovery of Libya’s supply.
“We still see the risks to our $70-85 range as skewed to the downside given high spare capacity, and downside risks to demand from weakness in China and potential trade tensions,” Goldman Sachs said.
Brent crude futures were down $1.63, or 2.24%, to $71.06 a barrel on Friday, their lowest level since December 2021. U.S. West Texas Intermediate crude futures fell $1.48 on Friday, or 2.14%, to $67.67, their lowest since June 2023. [O/R]
Investing.com — Strategists at Citi Research said oil prices could decline to around $60 per barrel by 2025, citing a significant market surplus as the primary driver.
While recent supply disruptions in Libya and a delayed production cut unwinding by OPEC+ have offered short-term support for Brent prices in the $70-72 range, Citi views this as temporary.
“At the time of writing, markets have not reacted to the OPEC+ decision, with Brent around flat to the 4 September close. Still, the Libyan situation could take months rather than a week to resolve, strategists wrote.
They highlight the likelihood of a strong market surplus emerging next year, pushing prices lower.
“We recommend selling on a bounce toward ~$80 Brent, as we look ahead to moves down to the $60 range in 2025 as a sizeable market surplus emerges,” the note states.
OPEC+ has delayed the start of its planned production cut unwind from October 2024 to December 2024, with the process now set to conclude by the end of 2025. This decision comes in response to recent market weakness and price declines, despite ongoing disruptions to Libyan oil supplies and broader economic concerns in the U.S. and China.
Separately, Bank of America’s Commodities Research team has revised down its price forecast to $75 per barrel for the second half of 2024, down from nearly $90, and for 2025, reduced from $80.
The team cites concerns about growing global oil inventories despite assuming OPEC+ will delay planned production increases. They note that weaker demand growth, combined with record OPEC+ spare capacity exceeding 5 million barrels per day, has dimmed the outlook for oil prices.
“In effect, we now see Brent oil prices moving from the top toward the middle of our unchanged $60-80/bbl medium-term range faster than previously warned,” BofA strategists said. This surplus in capacity, along with slower demand, also reduces the risk of price spikes from potential geopolitical disruptions.
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