Commodities shaken by concerns over Delta variant and Chinese economy

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From crude to copper and corn, commodity prices fell on Monday, hit by the spread of highly infectious coronavirus variants and concerns about slowing growth in China, the world’s largest consumer of raw materials.

Brent, the international marker of oil, fell 1.7% to $ 74.27 per barrel, while copper fell 1.1% to $ 9,390 per tonne, leaving it above $ 1,000 below the record reached in May.

Gold was also weaker as the dollar rose, making the previous metal more expensive for holders of other currencies. It fell 0.6% to $ 1,800 per troy ounce. Corn was trading at $ 6.23 a bushel, down 20% from this year’s May high, as some bull markets retreated due to recent rains in the US Midwest.

The rapid spread of the Delta coronavirus variant and signs of slowing growth in China are clouding the outlook for commodities markets, which have seen a series of blockbusters over the past year. There is also heightened uncertainty over the oil supply after Opec and its allies failed to reach an agreement on increasing production earlier this month.

“Infections are on the rise in many countries around the world and if restrictions are to be added or reinstated they could impact economic growth, and therefore oil consumption,” said Louise Dickson, oil markets analyst at Rystad Energy.

Over the weekend, G20 finance ministers warned that the rapid spread of the Delta variant was casting a shadow over improving economic prospects in Europe.

Meanwhile, analysts at JPMorgan said on Monday that modeling of the Delta outbreak in the UK suggested a level of hospitalization that may require some restrictions to be reintroduced.

Oil prices hit a three-year high of nearly $ 77 a barrel last week following the OPEC standoff before reversing price on concerns the latest spat could eventually lead to an increase in the production of the limbs.

Stephen Brennock, analyst at Brokerage, PVM said the disagreement between the group says Opec + could be the forerunner of a “pump-and-recovery scenario, which means a lot more oil is potentially brought to market.” He said it was no surprise that hedge funds went on the “defensive” and reduced their bullish bets on crude to a six-week low.

Industrial metals were also under pressure on Monday as investors weighed on Beijing’s decision to cut the reserve requirement ratio (RRR) for all banks on Friday so they could lend more.

China’s central bank estimates that this could free 1 billion Rmb ($ 150 billion) of long-term liquidity in the market.

Warren Patterson, head of commodities strategy at ING, said lowering the RRR could provide some support to commodities, which have come under pressure as investors cooled on so-called trading. reflation.

“However, the impact of the latest RRR cut in China may prove short-lived as the macro-market still faces growing uncertainties,” he said.

Morgan Stanley economists said the RRR cut was a response to the ‘recent growth hiccups’ in China amid a resurgence of the coronavirus, supply chain disruptions and further moderation in consumption interior.

Better weather conditions in the United States have led hedge funds and other speculators to take profits on their positions in corn in recent weeks. Dave Whitcomb of Peak Trading Research said there were seasonal sales by financial investors as well. “July is the most negative month of the year for agricultural markets,” he said.

Neil Hume, David Sheppard and Emiko Terazono in London

Video: How the energy transition is pushing up commodity prices


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