OPEC+ Struggles To Come To An Agreement

Energy

The oil market gave back all of its early gains yesterday and ended up settling down on the day, with OPEC+ failing to come to an agreement on production levels for February. While most members appear to support the idea of rolling over the current level of cuts into February, Russia is wanting to ease cuts by a further 500Mbbls/d, which would take the total level of cuts for the group to 6.7MMbbls/d. Given that the group failed to come to an agreement yesterday, discussions will continue later today. Given the latest developments and concerns over COVID-19, we believe that the group should take a more prudent approach and maintain the current level of cuts. A further easing in cuts does leave some downside risk for the market, particularly in the current environment.

Moving onto market positioning, and delayed COT reports show little change in the speculative positioning over the last reporting week for both ICE Brent and NYMEX WTI. Speculators decreased their net long in ICE Brent by just 549 lots, leaving them with a net long of 280,298 lots as of last Tuesday, while for NYMEX WTI, speculators sold 2,861 lots to leave them with a net long of 333,784 lots.

Metals

The metals complex started the new year on a strong footing, driven by tailwinds from negative US real yields and a weaker dollar.  Spot gold had a breakout, trading above US$1,900/oz for the first time since early November, reaching a high this morning of a little over US$1,945/oz. Similarly, spot silver prices have also strengthened, with prices hitting a high of US$27.56/oz yesterday.  Meanwhile, platinum had a wild run yesterday, with spot prices hitting more than a four year high of US$1,132/oz, while the NYMEX April contract jumped by more than 5.6%  to a high of US$1,142/oz. However, the market ended up giving back all of these gains later in the session. After a tumultuous year of disruptions for both platinum supply and demand, the net effect is that the market is expected to see another deficit over 2021.  The World Platinum Investment Council expects that the global market will see a deficit of -224koz this year.

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