Monthly Commodity Insights – Too early to become positive

by: Georgette Boele , Hans van Cleef , Casper Burgering

In this publication: One last wave of weakness in the CRB index. Oil prices have recovered (too far) while Natgas is still heavily pressured. The catch up of silver and platinum. Investors in base metals markets will remain cautious. High steel inventory levels prevent a swift recovery. Covid-19 hurts demand for agricultural commodities.

Monthly-Commodity-Insights-May-2020-3.pdf (877 KB)
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On 21 April the CRB index set a low at 101.48 when WTI oil prices dropped deep into negative territory.  WTI accounts for a considerable share of the CRB index (23%). Since then oil prices and the CRB index have recovered. The CRB index has risen by around 27.5%.

  • We expect the CRB index to weaken again in the coming three months on several reasons:
  • We think the market is underpricing macroeconomic risks, and expect renewed lower demand for oil and metals.
  • We expect another major risk-off wave. Investors will then probably sell commodities.
  • Resurfacing tensions between the US and China will dampen commodity demand.
  • Inventories in oil, industrial metals and some agricultural commodities are high, which will hang over markets for the time being.
  • The technical picture is deteriorating.
  • We think that the index will bottom before previous low.