Energy and agricultural products saw significant correlations across 2019, driven largely by persistent trade volatility and an economic slowdown that affected broad-based commodity demand – with some idiosyncratic factors playing out in the palladium and soy segments.
“Supply concerns have been heightened following Impala Platinum’s announcement that it had shuttered production at its Rustenburg and Marula mines due to power shortages. The mines, which produced almost 800koz of platinum and just over 400koz of palladium in 2018, were operating on 20-30% of normal power supply. This year we forecast marginally lower platinum production, falling further in 2020; we forecast palladium production to edge higher this year but also soften in 2020,” Standard Chartered economists wrote.
“Soybean prices have gained on positive headlines around the potential for a phase one US-China trade deal being signed, with China announcing waivers on soybeans and pork imports from the US as an interim step ahead of a deal. Preliminary China Customs trade data shows that China imported 8.2Mt of soybeans in November – a three-month high. Imports are up 34% m/m and 54% y/y. YTD imports, however, are still down 4.1 y/y.”
Economists said the oil price outlook in 2020 remains uncertain despite the recent OPEC / OPEC+ announcement that output cuts would be accelerated, in part due to some of the unique circumstances seen in Angola and Iraq.
“Angola has been unable to reach its target due a falling production base, averaging 90kb/d below target YTD and more than 200kb/d below in November. Angola’s target was left unchanged at 1.481mb/d.”
“It is clear that compliance from Iraq in particular is critical to the success of the latest deal. Were Iraqi output to stay close to 4.7mb/d over the next three months or even increase, then we think Saudi Arabia would have no choice at the March OPEC meeting but to reverse its additional 400kb/d of cuts and allow the oil price to find its own level. At the other extreme, were Iraq to fully comply then we have little doubt that the current production deal would be extended.”