HomeResearch and NewsCommodity market Report - October 2019

Commodity market Report - October 2019


Trade war risk is by far the most significant swing factor for most commodities and more than able to compensate for ultra dovish expectation from the global CBs with the Fed is going to cut rates for additional 100 bp and ECB to print Eur250 bn. in new QE money over the next year. Overall risk conditions switched to neutral mode with unexpectedly low volatility in equities but higher one in bonds and commodities. Oil and Gasoline are no longer overvalued and mostly in bear market. Precious metals and Nickel are the new stars and the main overweight in investor portfolios. Agri commodities (ex cocoa) are moderately undervalued. Industrial Metals kept on suffering from Trade War and economic slowdown especially in Auto and are the worst sector this year

Macroeconomic drivers moderately negative as China stimulus effect has faded and Fed dovishness helps only financial markets but not the US economy that is sliding to stagnation. Other EM is still in slowdown mode with Turkey, S.Africa, Argentina and Venezuela are close to crisis. The Fed could reduce rates the way it’s hoped by market only in the case of significant financial crisis like the one we’ve seen in 2007-08, 2011 or 2015-16. 

Chinese economy is facing risks of capital flight (requires higher interest rates to protect Yuan), economic slowdown (needs softer monetary policy) and Trade War escalation (latest talks were encouraging). Moreover there are signs of overheating in housing market and stress in overleveraged corporate and banking sector

Investors’ interest in commodities was pretty upbeat in summer but has been sliding since then. There is no excess in overall commodity universe with net long elevated in precious metals and net short in industrial one and coffee and natural gas. Other segments oscillate around neutral positioning

Weather conditions are moving toward El Nino that is negative for prices of most grains and natural gas, but a little bit positive for cocoa and coffee. Political risks are for downside for most commodities except Gold as Trade War, recession risks and dovish Fed are positive for haven demand


  • Add Short in Palladium at 1700 $/oz and 1200 $/oz target. Hold Long in Platinum and ad at 850 $/oz

  • Play the range in Brent: long at 50-55 and short at 65-70 $/bbl.

  • Buy Gold at 1375 $/oz with mid-term target of 1600 $/oz; hedge with Short in Silver at 18.0 $/oz

  • Play the range in Cocoa: long at 2150-2200 and short at 2500-2600 $/mt.

  • Add to long Coffee at 92-95 cents/lb for March futures with target above 120 cents/lb

  • At 250 c$/lb Copper could be a good contrarian buy with expectation for the end of Trade War

  • Long Feb Nat Gas futures at 2.1-2.2 $/MMBtu for colder winter and target 3.0-3.5 $/MMBtu 

Download PDF


Read more

Oil Market Report - May 2020

An unprecedented global Crude oil futures prices extended sharp declines in April 2020 amid a strong contraction in the global economy and oil demand due to the impact of the COVID-19 pandemic. In April 2020, the ICE Brent contract plunged by 21.0% mom to average $26.63 / bbl, while the NYMEX WTI contract lost 45.2% of its value to average $16.70 / bbl amid bearish market sentiment. Crude oil spot prices recorded a sharp monthly drop on a continuing growing oil surplus in the spot market and accumulating unsold cargoes, as refiners heavily cut runs due to plunging oil demand and global oil stocks rose both onshore and offshore. 

oil, investment

Arbat Capital: Banking Sector Report - April 2020

US banks increased significantly in April after very weak performance in the first 3 months of 2020. However, the broad market was only slightly outperformed after 3 months in a row of lagging dynamics. 

investment, banks;

Oil Market Report - April 2020

An unprecedented global oil demand shock and a massive sell-off in global oil markets accompanied by the breakdown of the OPEC+ agreement and the start of a new oil war between Saudi Arabia and Russia pushed crude oil futures prices to more than 18-year lows in late March 2020, while economic stimulus plans from governments and central banks, as well as some recovery in equity markets, failed to calm investor worries and to limit the oil price decline. 

Arbat Capital