Risk On Sentiment Dominates

Energy

Crude oil prices continued to trade firm with ICE Brent trading above US$50/bbl on optimism around the COVID-19 vaccine, with the US Food and Drug Administration (FDA) giving emergency use authorization to Pfizer-BioNTech vaccine last week. The vaccine rollout in the US will likely start today. A tanker explosion at the Saudi Port of Jeddah today also supported oil prices; though the cause of the explosion remains uncertain for now. Positive sentiment can also be seen in the CFTC Commitment of Traders report, with the managed money net long position in ICE Brent increasing by 26,999 lots over the last week. Money managers created fresh longs of 24,839 lots over the week and also covered 2,160 lots of short positions. This is the fifth consecutive week of higher speculative longs with speculative net longs increasing to a nine-month high of 272,863 lots. Managed money net longs are still only a fraction of the peak made in April 2018 (632,454 lots) and reflect the potential for further longs if current optimism continues.

Source: iStock

Looking ahead there are a number of data releases scheduled for the current week. OPEC will be releasing its monthly oil market report later today followed by the IEA’s monthly report on Tuesday; both of which will be watched closely for any revision in demand estimates for next year, as optimism around the vaccine rollout continues to rise. Later OPEC+ JMMC will have their meeting on 16 December to assess the market situation and provide recommendations, if any, to the group on further output cuts. Also, the EIA will be releasing its monthly drilling productivity report on Monday and the usual weekly petroleum status report on Wednesday.

Metals

The base metals complex started the week on a stronger footing amid a weaker US dollar and the FDA's vaccine approval. Looking ahead, the market will be focusing on the FOMC meeting (15-16 December) for its latest policy guidance as well as any news on the US COVID-19 relief package talks. Meanwhile, according to the latest CFTC data, it appeared that the funds community has maintained its enthusiasm for copper. Money managers continued to increase their net long position in COMEX copper for a third consecutive week; speculators bought 4,694 lots over the last reporting week, leaving them with a net long of 90,434 lots as of last Tuesday. They also added to net longs in COMEX gold by 19,084 lots, leaving them with a net long of 126,737 lots, and increased their net longs in silver marginally by 194 lots.

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