FX: Commodities have seen broad−based declines today
Commodities have seen broad-based declines today: risk aversion has generally increased and equities are down a few percentages following President Obama’s proposal on new banking regulation to limit the size and risk-taking of the largest US banks. Concerns over the prospect of Chinese rate hikes continue to weigh as well. Separately, Russian aluminium producer, Rusal, looks set to raise USD2.2bn in its IPO.
The direction of the weekly US inventories was broadly in line with our forecast: crude and distillate stocks fell whereas gasoline saw a significant rise. But, probably the main take-away from the US oil stock report yesterday is that refinery utilisation has declined markedly: partly due to Q1 maintenance, but crucially also as a result of weak demand. On the whole, it is starting to look like there may be downside risks to our 3M target of USD90 for WTI. We will revise our commodities forecasts/targets and introduce 2011 projections when we put out our Commodities Monthly next week.
The detailed commodity-trade data for China (see table) released yesterday confirmed that copper imports rebounded in December and that aluminium saw a further decline, likely a result of increased domestic production. Chinese imports of soy beans are at record highs and iron ore imports up 80% y/y. Most notably, coal imports have risen more than 500% y/y, up from an average of 4m tons prior to 2009 to above 16m in December.
On the calendar today, most noteworthy is that Euroland industrial new orders surprised on the upside; the monthly rise was 1.6% m/m vs. the median expectation of a 0.5% increase. This evening, the Baker Hughes rig count for the week to 22 January will be published.
