• Economic data was mixed over the past month, but the impact from severe weather on advanced economies appears to be abating. Partial indicators suggest China’s economy has continued to slow.
• US tapered QE again and markets remain volatile as they try to discern Fed direction. China had its first domestic bond default, fuelling financial stability concerns.
• Since mid-January, several idiosyncratic factors, such as the ramping up of takeaway capacity by the Keystone XL Pipeline, better US economic data and unseasonably cold weather, have propped West Texas Intermediate (WTI) prices up relative to Tapis and Brent. Meanwhile oil prices also derived some support from the escalation of geopolitical tensions in the Ukraine. However, they have since moderated on easing concerns that economic sanctions would cause significant supply disruptions.
• Prices for bulk commodities declined across February and March, with significant volatility in iron ore (likely related to unconventional financing arrangements). Recent weak spot prices for both thermal and metallurgical coal have resulted in weaker than expected settlements for contract prices (particularly in metallurgical coal markets).
• Prices for the base metals complex were mixed, but are generally softer on concerns over the Chinese economy. Indonesian export ban and geopolitical concerns impacted supply outlook for some metals.
• Gold prices shifted higher in the first half of the month, responding to renewed safe haven demand stemming from geopolitical risks and emerging market concerns. Prices subsequently eased on China stimulus hopes and US Fed actions.
• Overall, our forecasts for commodity prices have been left largely unchanged. We continue to expect only a modest recovery in demand over the forecast horizon, but the recovery is expected to be bumpy.

For further analysis download the full report.

• Commodity Update: Minerals and Energy – March 2014 (PDF, 250KB)