Commodity Calls: Week Ending 31 May 2024

OPEC+ sends mixed messages on supply cuts, BHP fails to acquire Anglo American, and gold waits on European Central Bank’s rate decision.

Join Global X each week for ‘Commodity Calls’ to explore all the recent signals and developments that occurred in the world of commodities.

Looking for more? Check out this week’s Market Moves and Thematic Spotlight.

Crude Oil

Bullish

  • The OPEC+ has extended supply cuts of roughly 2 million barrels a day that were due to expire by the end of June. The new arrangement will see supply cuts continue until the end of Q3, after which the group will slowly return to full production.

Bearish

  • Oil fell to its lowest level in four months after OPEC+’s plans to return to production raised concerns about potential oversupply. The oil-producing bloc met to discuss further supply cuts, but instead revealed plans to increase production by as early as October.1
  • According to energy think tank Ember, roughly one-fifth of the European Union’s fossil fuel-based power generation has been replaced by solar and wind electricity between 2019-2023.2 Solar and wind installations have soared by 65%, and power generation has grown by 46%.3

Explore crude oil with BCOM.

Copper

Bullish

  • Copper prices rose after US economic data showed signs of slowing inflation, increasing near term odds of Fed rate cuts in 2024.4 US inflation core PCE rose by 0.2% in April, its slowest rate in 2024. Markets currently expect the first decrease in US interest rates to occur in September.5

Bearish

  • The BHP and Anglo-American acquisition saga came to an end, with BHP walking away from what would have been the biggest mining deal in over a decade.6 Anglo rejected BHP’s final offer of US$49 billion due to a complicated deal structure that would require Anglo to spin-off major operations in South Africa prior to takeover. BHP would have become the world’s largest copper producer upon a successful acquisition.7

Explore copper with WIRE.

Gold

Bullish

  • Gold prices rose on weak US GDP growth and factory activity as well as slowing inflation, raising expectations the Fed would cut interest rates this year.8 US dollar and bond yields both fell, elevating the attractiveness of the precious metal.
  • The European Central Bank (ECB) rate decision is due to be announced this Thursday, the 6th of June.9 Markets widely expect the ECB to perform its first rate cut at the meeting.10 Five further rate reductions are expected between now and December 2025.11

Bearish

  • After a near 20% rally over the past 12-months, analysts widely expect a correction in gold price as geopolitical tensions cool and economic conditions stabilise.12

Explore physical gold with GOLD.

 

Forecasts are not guaranteed and undue reliance should not be placed on them. This information is based on views held by Global X as at 04/06/2024. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be individual or personalised investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.