Commodity weekly: Crude production curbs and dollar strength in focus Commodity weekly: Crude production curbs and dollar strength in focus Commodity weekly: Crude production curbs and dollar strength in focus

Commodity weekly: Crude production curbs and dollar strength in focus

Ole Hansen

Head of Commodity Strategy

Summary:  The first full week of September saw three major developments that impacted commodities; broad sentiment was negatively impacted by the dollar reaching a six-month high and a near record level against the off-shore Chinese renminbi, Saudi Arabia and Russia extended current voluntary production cuts to yearend, while the prospect for a sentiment supportive peak rate scenario in the US was pushed further out after economic data continued to show strength. Overall, these developments has left the Bloomberg Commodity Total Return Index trading small up on the month with crude oil and fuel product strength offsetting losses in precious and industrial metals

Global Market Quick Take: Europe
Commodities podcast: Crude’s artificial tightness, uranium and gold

The first full week of September saw three major developments that impacted commodities; broad sentiment was negatively impacted by the dollar reaching a six-month high and a near record level against the off-shore Chinese renminbi, Saudi Arabia and Russia extended current voluntary production cuts to yearend, while the prospect for a sentiment supportive peak rate scenario in the US was pushed further out after economic data continued to show strength.

Overall, these developments left the Bloomberg Commodity Total Return Index trading small up on the month with losses in precious and industrial metals being offset by gains in softs, grains and, not least, the energy sector where strong gains were being led by diesel and gasoline.

Crude oil and fuel products

The big commodity story of the week was Saudi Arabia and Russia’s decision to extend current voluntary production and export cuts until yearend, an extension had been expected but the fact they went for three months instead of the usual one month at a time surprised the market, and the political driven decision lifted crude oil and fuel prices amid fresh buying from traders looking for continued upside momentum. This artificially created tightness – note that OPEC spare capacity has risen above six million barrels, the highest since 2015 - is likely to worsen before softening from October and onwards when refinery demand for crude oil slows due to maintenance.

In addition, the tightness continues to be felt across the refined product market where higher prices could see inflation climbing higher in the coming months, thereby supporting a higher for longer interest rate stance from the US Federal Reserve, and with that increase risk to growth and demand into 2024. On Friday the US and not least European diesel futures contract rose sharply to support a Brent bounce back above $90 after Russia announced plans to reduce diesel exports from its key western ports by one quarter this month amid, the mentioned seasonal refinery maintenance and in order to keep more fuel at home to suppress otherwise rising prices. The Europe based ICE Gasoil futures contract reached $131 per barrel, an eight month high, while the New York Ultra-light Sulphur Diesel contract traded above $138 per barrel.   

From a technical perspective, Brent has been in a bullish uptrend since July and needs to hold support at $89 as a break may trigger long liquidation towards $87.5 from traders who bought the production cut extension news. However, the medium-term uptrend is still firm with trendline support near $85, potentially being the bottom of a new higher range supported by OPEC’s active management of supply. We do not join the $100 per barrel camp but will not rule out a relatively short period where Brent could trade above $90.

Precious metals

The direction of precious metals continues to be dictated by incoming US economic data, as it eventually will determine the direction the US Federal Reserve decides to go on rates. It was weaker than expected economic data that supported an end of the August rally as it lifted expectations of peak rates followed by lower rates in 2024, and in the process forced traders to cover short positions which had been established in response to dollar and bond yield strength.

The softness in US economic data did not last, and during the past week both manufacturing and services PMI showed strength, with the headline and the prices paid component beating expectations, thereby once again raising odds of a quarter-point Fed rate increase in November to more than 50%, and with that another delay to the timing of a precious metal supportive peak rate scenario.

The sharp turnaround in rate expectations helped send bond yields higher while reducing the number of expected 25-bps rate cuts next year from five to four. The dollar, however, remains one of gold traders' biggest sources of directional inspiration and this past week, the Bloomberg Dollar Index, which tracks a basket of 11 major currencies, reached a six-month high. The jump in crude oil prices following Saudi Arabia’s decision to extend its unilateral production cut until year end, has probably helped prevent an even deeper setback for gold as it not only raises inflation but also growth concerns.

At Saxo, we maintain a patiently bullish view on gold and with that also silver. We see the yellow metal eventually reaching a fresh record in the coming months. The timing for a fresh push to the upside, however, will remain very US economic data dependent as we wait for the FOMC to turn its focus from rate hikes to cuts, and during this time, as seen recently, we are likely to see continued choppy trade action. 

Having found trendline resistance at $1947, gold has returned to test the 200-day moving average, currently at $1918 ahead of $1910, the 0.618 Fibonacci correction of the August rally. Overall, the metal is stuck in a narrowing range, currently between $1893 and $1942.

Source: Saxo


Copper futures in London and New York were heading for a 2.5% weekly decline after sentiment was hurt by the stronger dollar, not least against the Chinese renminbi where the offshore yuan traded near a record low amid fears surrounding Chinese growth. A near 30% jump in copper inventories on the London Metal Exchange, the most in two years, added to the negative sentiment, despite the overall level of exchange monitored inventories in New York, London and Shanghai remaining at historical low levels.

China’s commodities import surged last month, ahead of an expected seasonal pick-up in economic activity and as government stimulus begins to filter through into raw materials and following months of destocking amid an uncertain economic outlook, the prospect for further stimulus measures are supporting a period of restocking to meet future demand for finished goods. Coal and copper ore shipments both jumped to all-time highs, crude oil imports reached the third highest level on record while iron ore imports reached a three-year high.

Overall, copper remains resilient and despite an environment of stagnant manufacturing PMIs, normally well correlated with copper demand, Chinese demand has remained surprisingly robust. Not least driven by strong, and government supported, green transition demand towards batteries, electrical traction motors, energy storage and grid upgrades.

The lack of big mining projects to ensure a steady flow of future supply continues to receive attention from long-term focused investors as it supports our structural long-term bullish outlook, driven by rising demand for green transformation metals and mining companies facing rising cash costs driven by higher input prices due to higher diesel and labour costs, lower ore grades, rising regulatory costs and government intervention, and significantly climate change causing disruptions from flooding to droughts.

For now, just like gold, we remain patiently bullish while the price of HG copper continues to trade within a $3.50 to $4 range. In the short-term, movements in the Chinese yuan will likely provide most of the directional price input as speculators, currently holding a small net short in HG copper, continue to adjust positions accordingly.


Despite a recent pocket of strength in rice and sugar due to export curbs and hot weather impact on production in Asia, the UN FAO Global Food Price Index continued its steady decline last month. The index which tracks more than 90 price quotations split into five groups of meat, dairy, cereals, vegetable oils and sugar averaged 121.4 points in August, down 2.1% on the month and down 11.8% compared with the same time last year.

The index has seen a steady decline since hitting a record high in March 2022 when Russia’s attack on Ukraine triggered a surge in prices of wheat, corn and edible oils. Since then, the outlook for supply has continued to improve, and despite worries that El Niño may negatively impact agriculture production in Asia and South America in the coming months, the northern hemisphere harvest looks big enough to avoid any near-term price spikes.

Returning to the UN FAO index, the drop last month reflected declines in all groups apart from sugar which received a boost from dry weather worries in India and Thailand. In the cereals group there was a sharp divergence between a 3.8% drop in international wheat prices and the FAO All Rice Price index which jumped 9.8% month-on-month to a reach a 15-year high, amid tight global supplies ahead of new-crop harvest and India’s July export ban on Indica white rice. 

Nuclear vs offshore wind

The share price collapse of Denmark based Orsted over enormous problems around their offshore wind projects in the US has put offshore wind power into question in relation to the green transformation. To make things worse, Orsted said that unless it gets more US tax credits, it will have to abandon some offshore wind power projects. Adding insult to injury, the UK government this week failed to attract any bids for their latest offshore wind project, after companies competing for contracts warned that rising costs had not been taken into consideration.

Nuclear power was the best performing energy segment in August and a relative chart between Orsted (one of the world’s largest offshore wind developers) and Cameco (one of the world’s largest uranium miners and nuclear power technology providers) reveals the big shift in sentiment. Our view remains positive on nuclear power as we see policymakers concluding that nuclear power is the only zero-carbon large-scale high energy density solution to significantly increase baseload electricity. Given the installed capacity of solar modules this year, it looks more and more certain that solar will be the long-term winner among the renewable energy sources.

Source: Bloomberg

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992