The past month has been hard on the global oil market and base metals market with prices for Brent crude and LME copper 3M falling to the lowest levels since 2008 and 2009, respectively. As we wrote in Commodities Forecast Update: Iran deal, China concerns weigh on commodity prices 24 July, and Commodities Strategy: Any positive oil supply surprises left? 24 July, we expected global growth to be the main driver of the oil and base metals market for the rest of 2015 and in 2016 but we also saw a risk of some weakness in the near term on the back of Chinese growth concerns and a possible rate hike from the Federal Reserve.
In the meantime, these two factors have hit the oil market and base metals market much harder than we pencilled into our forecasts one month ago. However, the positive reaction in commodity markets to the interest rate cut by the People's Bank of China (PBoC) yesterday marks a clear indication that a policy response that will support demand is probably the right medicine for commodity markets in the current situation, as demand concerns have been the main factor sending prices lower in recent weeks.
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