Weekly Report: Metals & Energy ( Dec 26 Dec 29, 2017)

Transcription

1 Weekly Report: Metals & Energy ( Dec 26 Dec 29, 2017) Weekly Highlights Gold prices held steady below a two-week high in thin pre-holiday trade on Friday amid firmer equities and a sturdy dollar, remaining on track to log a second consecutive week of gains. Spot gold hit its highest since Dec 6 at $1, during the week. It was up 1.72 per cent for the week. Spot silver rose 2% its second consecutive weekly gain after three weeks falls and settled higher at $16.36 an ounce on COMEX division Tension has been rising over North Korea s nuclear and missile programmes, which it pursues in defiance of years of U.N. Security Council resolutions, with bellicose rhetoric coming from both Pyongyang and the White House supporting bullion prices. U.S. growth prospects dimmed on Friday as data showed spending outpaced income in November and the Federal Reserve s preferred inflation measure - the personal consumption expenditures price index that excludes food and energy - rose by just 0.1 percent in November. Shanghai copper prices rose to a two-month peak as smelters in China cut production amid natural gas shortages in some parts of the country. Inside this issue: Highlights 1 Shanghai nickel jumped more than 4 percent last week, tracking a move in London after China said it would cut duties on some steel exports, which raised expectations for demand. China will cut export taxes on some steel products and fertilisers and ditch those for sales abroad of steel wire, rod and bars from Jan. 1, the Ministry of Finance said on Friday, in a series of measures that could boost shipments. Zinc closed up 2 percent at $3,275, having hit its highest since Nov. 1 Week Ahead 1 Weekly Levels 2 Bullion Fundamental 3 Bullion Technicals 4 Oil prices were on the rise with WTI crude lingering near 2015 highs on the back of an outlook for healthy demand amid ongoing production cuts led by OPEC and Russia. For the week WTI and MCX crude futures registered around 2 per cent of gains Brent has risen by 47 per cent since mid The Organization of the Petroleum Exporting Countries (OPEC), the Middle East-dominated producer club, and Russia the world's single biggest oil producer have been withholding output in order to tighten the market and prop up prices. Natural gas rose by more than 2% at MCX and more than 2.5% at NYMEX due to short covering ahead of Christmas holidays. Prices also shot up amid more than expected inventory drawdown. For the week ahead, Japan will be in focus on Tuesday with inflation data and BoJ monetary policy minutes. Base Metals Overview 5-6 Also stateside, the main economic release will be the Conference Board s consumer confidence for December on Tuesday. In European data, investors will receive first indications of euro zone inflation with CPI readings from Germany and Spain on Friday. Energy 7 Fundamentals Energy Technicals 8 US Economic 9 Calendar Week Ahead Buy : Natural gas On December 21, 2017, the EIA released the US natural gas inventories report. US natural gas inventories fell by 182 Bcf (billion cubic feet) to 3,444 Bcf on December 8 15, 2017, according to the EIA. Inventories fell 5% week-over-week and by 183 Bcf or 5% year-over-year. China s monthly natural gas imports from leading supplier Turkmenistan fell in November from the previous month to their lowest since December 2016, leaving Beijing increasing purchases from elsewhere to try to cope with a growing supply crunch. 1

2 WEEKLY LEVELS Commodity S1 S2 R1 R2 GOLD SILVER COPPER ZINC NICKEL ALUMINIUM LEAD CRUDE OIL NATURAL GAS (January )

3 BULLION FUNDAMENTALS Precious Metals GOLD Gold prices held steady below a two-week high in thin pre-holiday trade on Friday amid firmer equities and a sturdy dollar, remaining on track to log a second consecutive week of gains. Spot gold hit its highest since Dec 6 at $1, during the week. It was up 1.72 per cent for the week. The dollar edged up on Friday though it remained on track for weekly losses, while the euro slumped after Catalan vote results indicated a victory for separatists in a blow to Madrid. The US Congress on Thursday averted a government shutdown just one day before federal funding was due to expire, sending Trump a bill to provide just enough money to keep agencies operating through Jan. 19. The greenback was also supported as Congress had approved the biggest overhaul of the country's tax code in 30 years, which was expected to give at least a short-term lift to economic growth. The Moscow Exchange will launch deliverable futures for gold in 2018 in a move to further prop up bullion market liquidity, bourse chief executive Alexander Afanasiev said on Thursday. SILVER Spot silver rose by 2%, its second consecutive weekly gain after three week falls & settled higher at $16.36 an ounce on the COMEX division. On MCX, prices settled the week higher 2.01% or 749 points at Rs.37954/kg its highest weekly gain after a three week losing streak. Anemic U.S. consumption data on Friday helped silver prices march higher, while the dollar remained under pressure with thin trading in Asia. Tension has been rising over North Korea s nuclear and missile programmes, which it pursues in defiance of years of U.N. Security Council resolutions, with bellicose rhetoric coming from both Pyongyang and the White House. Global uncertainty lifted silver prices up amid safe haven buying. U.S. growth prospects dimmed on Friday as data showed spending outpaced income in November and the Federal Reserve s preferred inflation measure - the personal consumption expenditures price index that excludes food and energy - rose by just 0.1 percent in November, giving support to silver prices. For the week ahead, Japan will be in focus on Tuesday with inflation data and BoJ monetary policy minutes. Also stateside, the main economic release will be the Conference Board s consumer confidence for December on Tuesday. 3

4 Precious Metals BULLION TECHNICALS GOLD Gold prices revived after tumbling down for four consecutive weeks and settled 1.41 percent higher on MCX. Prices got support at 200 week EMA and recovered well that shows buyers attraction on lower levels. Moving ahead, prices look to reclaim new highs this week and can test 50 week EMA at Rs.29050/10gms mark at MCX and around $1295/oz at COMEX. On the other hand, prices have formed short term base at Rs.28420/10gms($1260/oz) level that would provide key support for precious metal. Needless to say, Rs.28000/10gms($1236/oz)mark has become a crucial territory for prices on the downside with multiple supports in medium term. Overall, recent recovery seems to continue in the counter and buy on dips would be the preferable strategy for next week. SILVER Bulls remained active throughout the week building a momentous rally in white metal. Silver prices on MCX closed the week higher 2.01% or 749 points at Rs.37954/Kg. Silver spot on COMEX division settled the week higher 2% at $16.36/oz. After a vicious fall for three consecutive weeks prices are now stable and building upside momentum. On four hourly charts, prices are clearly trading above its 20 EMA and formed higher high higher low pattern confirming bullish biasness for the week ahead. Also, prices have broken out from ascending triangle pattern as they closed above the key resistance of Rs.37625/kg level ($16.20/oz on COMEX), which will now act as a key support for the prices. Traders are advised to build long positions close to Rs.37750/kg ($16.25/oz on COMEX) as price retraces n retests the key support for upside targets of Rs.38700/Kg corresponding to $16.85/oz, keeping stops below Rs.37250/Kg. 4

5 Base Metals BASE METALS OVERVIEW FUNDAMENTALS Copper soared to two month highs, up by 3.41 per cent at LME for the last week, on bright Chinese economic prospects and supportive US housing data. The World Bank raised its forecast for China s economic growth in 2017 to 6.8% from 6.7% it projected in October, as personal consumption and foreign trade supported growth. International Copper Study Group (ICSG) also provided some bullish cues for the metal. World mine copper production declined by around 2.5% in the first nine months of The decline in world mine production was mainly due to 4% decline in production in Chile, the worlds biggest copper mine producing country, negatively affected by the strike at the Escondida mine and lower output from Codelco mines. Copper is on track to post its best year since 2010, supported by a favorable global economic backdrop and the prospect of mine disruptions across the globe. It has gained around 25 per cent at LME till last week. Pan Pacific Copper, Japan's biggest copper smelter, expects copper prices to rise more than a quarter over the next two years as global demand continues to grow and outpaces supply. Shanghai nickel jumped more than 4 percent last week, tracking a move in London after China said it would cut duties on some steel exports, which raised expectations for demand. China will cut export taxes on some steel products and fertilisers and ditch those for sales abroad of steel wire, rod and bars from Jan. 1, the Ministry of Finance said on Friday, in a series of measures that could boost shipments. Helping to trim a glut of stockpiles in the exchange, the global deficit for refined nickel widened to 65,700 tonnes in the first nine months of the year, from 47,400 tonnes, in the same period of 2016, data from the International Nickel Study Group showed. The news helped to push up steelmaking raw materials prices. Dalian iron ore futures surged 7.1 percent. Copper Technicals Copper prices extended gains for the second week in a row where counter gained 3.19 percent on a weekly basis. A breakout above Rs.452/kg (now will work as support) odd levels on daily chart strengthened prices which are looking up with momentum. Daily MACD is positive and prices are trading above 20 day EMA that gives thumbs up to positive sentiments. Though bulls may find upside hurdle near previous swing high at Rs.467/kg mark but next move above the same could lead this rally towards Rs.475/kg levels. For the coming week, traders can buy copper near Rs /kg levels for target price of Rs.467/kg mark with a stop loss of Rs.452/kg mark. Nickel Technicals Nickel prices were well placed with crown position and gained 4.18 percent last week. Ongoing rally from lower levels stretched the metal towards near term resistance at Rs.780/kg mark but ended this weekly episode with a suspense that whether prices will be able to make a win above the mentioned mark or not. To get a clue from daily RSI indicator that is trading near 70 levels, probability is high that prices may see a pull back from resistance zone and can take a plunge towards Rs.745/ kg levels. Also, considering the favorable risk-reward, one can take a bet to sell nickel near Rs /kg band with stop loss of Rs.786/kg level while considering Rs.745/kg odd level as near term price target. 5

6 Base Metals BASE METALS OVERVIEW Zinc closed up 2 percent at $3,275, having hit its highest since Nov. 1, amid signs of improving demand. Ivanhoe Mines (OTCQX:IVPAF) announced a pre-feasibility study for its Kipushi mine in the Democratic Republic of Congo ("DRC"). The mine appears ready to add 135,000 tonnes of zinc to the market in 2019 before ramping to a 200,000+ tonnes per annum ("tpa") production level in Chinese zinc production also lept, totalling 603,000 tonnes in November up 7.5% from the same month last year. However year to date zinc output is down 1.3% to 5.65m tonnes. Aluminium closed up 5.92 percent at $2,183 a tonne, having hit its highest since Oct. 29 at $2,215 a tonne. Japanese aluminium buyers have agreed to pay producers a premium of $103 per tonne for metal shipped in the January-March quarter, reflecting higher spot premiums, five sources told Reuters. Wednesday s data from the International Aluminium Institute showed daily average aluminium output in China fell to 78,300 tonnes in November against 82,100 tonnes in October. Limiting gains in aluminium, stocks of the metal in warehouses monitored by the Shanghai Futures Exchange are at a record 741,324 tonnes, suggesting surpluses. Shanghai aluminium prices rose over 1 percent on Wednesday, bouncing back from a slight dip in the previous session, as rising raw material prices and production cuts in China provided end-of-year support to the market. Producers of alumina in northern China have been affected by an escalating natural gas shortage in the region, pushing up the price of the substance, which is used by smelters to make aluminium. Lead closed down 1.57 percent at $ a tonne, having its highest since September 24 at $ a tonne. China banned imports of lead from from North Korea in November, the second full month of the latest trade sanctions imposed by United Nations against Pyongyang, data from the General Administration of Customs showed on Tuesday. Zinc Technicals Zinc prices marked two-week high while gaining 2 percent to settle the week. Prices have bounced from 20 week EMA and made a comeback on higher side. For the coming days, prices are likely to step forward and can look for upside zone near Rs.211/kg and next at Rs.215/kg hurdle mark. Furthermore, a dip can be seen that could take support near Rs.207/kg level and can be seen a good level to make an entry for potential upside with next key support at Rs / kg level for this week. Overall breath is positive in near term and traders are advised to be on the long side, while considering mentioned levels. Aluminium Technicals Light metal had a reason to delight as the counter was a top gainer in the metal complex. Prices surged nearly 6 percent with a tall white candle on weekly chart. Going forward, trend looks set for some more action. A little dip near Rs.137/kg support can be used to add long trades with a caution below Rs /kg mark. On the higher side, price may advance towards Rs /kg upside territory. Having said that, we recommend buying aluminium at Rs.137/ kg levels for the target price of Rs /kg level with stop loss at Rs / kg mark. Lead Technicals Counter has been trading sideways for almost nine consecutive weeks in a range between Rs.156/kg and Rs.165/kg giving trading opportunities for range traders on both sides. This week was the turn of the bears to make profit as prices got nicely rejected from the key range resistance of Rs.165/kg and closed the week lower 2.16% or 3.5 points at Rs /kg. Prices are now closer to lower range support of Rs.156/kg where smart money is eagerly waiting to buy again. Traders are advised to follow range trading strategy for the week ahead by building long positions close to Rs.157/kg for upside target of Rs.165/kg keeping stops below Rs.155/kg. Any convincing break of the downside support will negate the trading idea and prices will follow the direction of breakout. 6

7 ENERGY FUNDAMENTALS Energy CRUDE OIL Oil prices were on the rise with WTI crude lingering near 2015 highs on the back of an outlook for healthy demand amid ongoing production cuts led by OPEC and Russia. For the week WTI and MCX crude futures registered around 2 per cent of gains Brent has risen by 47 per cent since mid The Organization of the Petroleum Exporting Countries (OPEC), the Middle East-dominated producer club, and Russia the world's single biggest oil producer have been withholding output in order to tighten the market and prop up prices. Jabar al Luaibi, oil minister of OPEC-member Iraq, said on Monday there would be a balance between supply and demand by the first quarter of 2018, leading to a boost in oil prices. The production cuts come amid healthy global demand, which is expected to hit 100 million barrels per day (bpd) for the first time at some point next year or in Keeping a lid on prices for the moment is the expected return of the Forties pipeline system in the North Sea, which can supply up to 450,000 bpd of crude underpinning Brent futures. The pipeline shut down earlier in December due to a crack, but operator Ineos said the system was being tested following repairs and full flows should return in early January. On Wednesday, the Energy Information Administration (EIA) reported yet another inventory draw for last week, making it the fi fth one in a row with falling inventories. The inventories dropped by 6.5 million barrels to million barrels. However, US weekly production rose agai n, rising to 9.79 million barrel a day. US crude exports also bounced to 1.86 million barrel per day. The US rig count, an early indicator of future output, held at 747 in the week to December 22, according to the latest weekly report by Baker Hughes. That's still much higher than a year ago, when only 523 rigs were active, and most analysts expect US output to rise past 10 million bpd within weeks. NATURAL GAS Natural gas rose by more than 2% at MCX and more than 2.5% at NYMEX due to short covering ahead of Christmas holidays. Prices also shot up amid more than expected inventory drawdown. On December 21, 2017, the EIA released the US natural gas inventories report. US natural gas inventories fell by 182 Bcf (billion cubic feet) to 3,444 Bcf on December 8 15, 2017, according to the EIA. Inventories fell 5% week-over-week and by 183 Bcf or 5% year-over-year. US natural gas inventories fell by 200 Bcf during the same week in The five-year average withdrawal for this period of the year was at 125 Bcf. Inventories also fell by 69 Bcf for the week ending December 8, U.S. production is projected to reach 63 billion cubic feet per day, or Bcf/d in January, largely on the robust performance of the Appalachia region, which includes the Marcellus and Utica shale plays, the EIA said. Out of seven key regions, Appalachian production is expected to lead the way at 26.4 Bcf/d, the EIA said. The Marcellus shale is in Pennsylvania, Ohio, New York, West Virginia and Maryland. China s monthly natural gas imports from leading supplier Turkmenistan fell in November from the previous month to their lowest since December 2016, leaving Beijing increasing purchases from elsewhere to try to cope with a growing supply crunch. 7

8 Energy ENERGY TECHNICALS CRUDE OIL Oil prices recovered from two week lows as price took support at Rs.3600/bbl mark to close the week higher 1.85% or 68 points at Rs.3737/bbl on MCX. On weekly charts, prices have been in a clear up trend since forming base at the said mark. Downside got capped as prices formed doji candle stick pattern last week and hammer pattern for the week. Bullish pattern formation for two consecutive weeks confirms that bearish pressure is now decreasing and bulls are now ready to roll over, confirming biasness for the week ahead as bullish.however,rs.3750/bbl still remains a strong resistance and last hurdle for bulls. Traders are advised to build long positions once prices are able to close above this level for next target of Rs.3875/bbl, keeping stops below Rs.3680/bbl level. NATURAL GAS After two consecutive weeks of losses, natural gas prices managed to recover last week forming crucial base at Rs.165/mmbtu mark. Giving a pause to selling pressure, the energy counter managed to close the week higher 2.1% or 3.5 points at Rs.170/mmbtu mark for December contract. On weekly charts, prices formed a doji candle stick pattern which confirms selling exhaustion and entry of fresh buyers. Also, on hourly charts, prices took support at Rs / mmbtu (on January contract) marked twice and recovered on good volumes forming a double bottom pattern and confirming biasness of the week ahead as bullish. Traders are advised to build long positions close to 20 EMA around Rs.170/mmbtu mark for upside targets of Rs.179/mmbtu, keeping stops below Rs.165/mmbtu. 8

9 Date Time Name For Consensus Previous Importance 26-Dec 19:30 S&P/CS HPI Composite - 20 n.s.a. (YOY) Oct % 6.2% High 26-Dec 20:30 CB Consumer confidence Dec Very High 27-Dec 20:30 Pending Home Sales (MoM) Nov % 3.5% Very High US Economic Calendar 28-Dec 19:00 Goods Trade Balance Nov B B Very High 28-Dec 19:00 Initial Jobless Claims Nov K 245K Very High Dec 26 Dec 29, Dec 20:15 Chicago PMI Dec Very High 28-Dec 21:00 Natural Gas Storage Weekly -182B Very High 28-Dec 21:30 Crude Oil Inventories Weekly M M Very High 29-Dec 23:30 U.S. Baker Hughes Oil Rig Count Weekly 747 Very High Sugandha Sachdeva Gaurav Sharma Rahul Sharma In-charge-Metals, Energy & Currency Sr. Analyst, Metals, Energy & Currency Analyst, Metals & Energy Vipul Srivastava Amandeep Singh Analyst, Metals & Energy Analyst, Metals & Energy Research Team Source: Reuters, Investing.com, briefing.com ID: metals.research@religare.com Disclaimer: 9