Commodities ETP round-up: IEA predicts gradual oil price rebalance

Nov 17th, 2015 | By | Category: Commodities

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ETF Securities, a leading provider of commodity-based exchange-traded products, has released its latest weekly multi-asset research report highlighting trends in commodities markets. The following is a summary of the main moves over the week.

Commodities ETP round-up: IEA predicts gradual oil price rebalance

The International Energy Agency (IEA) this week released research predicting a slow rebalancing of oil prices over the next five years. Meanwhile, in the currency markets, the recent strength of the US dollar and British pound continued, with the former’s robustness keeping demand and prices for precious metal ETPs low. In other news, long ETPs tracking sugar and cocoa were the week’s two biggest gainers amid upwards revisions of predicted 2016 deficit levels.

Weekly Commodity ETP Roundup: IEA predict gradual oil price rebalance

Weekly Commodity ETP Roundup: IEA predicts gradual oil price rebalance.

The IEA, an autonomous organisation working to ensure reliable, clean, and affordable energy for its member countries, this week released the World Energy Outlook 2015, a report investigating the predicted dynamics of energy markets over the next five years. The group found that oil markets, and hence oil-tracking ETPs, are to remain subdued with the expected rebalancing of oil prices to $80 per barrel occurring by 2020.

The report found that, while US oil inventories are expected to decline significantly during 2016, and demand is expected to grow by 900,000 barrels a year, the effect of Saudi Arabia undercutting the price of Brent Crude will continue to keep prices depressed. Also, increased demand from China may be muted as recent statistics show the country to be progressively moving away from industrial-style growth to a service-based economy.

Edith Southammakosane, Director of Research Analyst, ETF Securities, commented: “China import, industrial production and loan growth data came below expectations and previous months’ numbers. However, MSCI China A index gained 3.1% last week responding to the better-than-expected October Chinese retail sales data and the strong ‘Singles Day’ sales last Wednesday, highlighting the transition in China’s engine of growth toward services.”

The continued volatility in energy markets was profitable to investors holding ETPs expressing short positions in their underlying oil commodities; last week the ETFS Daily Short Brent Crude (SBRT) gained 7.4% and ETFS Daily Short WTI Crude Oil (SOIL) gained 7.4%.

In the currency markets, ETPs that were long the US dollar or the British pound gained over the past week against all major trading currencies. The ETFS Short EUR Long USD (SEUR) gained 1.0% and the ETFS Short EUR Long GBP (URGB) gained 0.6%. The main factors influencing these moves were strong jobs reports with the pound promptly bouncing back from initial losses following the Bank of England’s decision to keep rates unchanged.

The strong dollar and muted global growth has continued to keep down prices of ETPs tracking precious or industrial metals. The ETFS Precious Metals (AIGP) fell 2.9% and the ETFS Industrial Metals (AIGI) fell 2.8% over the past week.

Meanwhile, ETPs tracking sugar and cocoa were the biggest winners of long commodity trackers over the past week. The International Sugar Organisation increased the proposed deficit for sugarcane in 2016 to 3.5 million tonnes from September estimates of 2.5 million. Also, the Swiss-based chocolate maker Callebaut announced the acquisition of the Ghanaian cocoa purchaser.  The ETFS Sugar (SUGA) gained 1.4% and the ETFs Cocoa (COCO) gained 1.7%.

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