语言：英文
页数：126
The Commodity Manual
Brent Remains Challenged; Ali Price Pressure Ahead

Some progress in rebalancing global crude markets, but many challenges ahead.We’ve argued that the Atlantic Basin needs a recovery in crude runs and a realignment of trade flows to rebalance. We have seen some progress on both fronts. Euroil data for July show a MoM increase in European runs, which should reduce the amount of crude that needs to move to new markets. In addition, Brent-Dubai has narrowed and West African diffs have weakened to make crudes competitive in Asia. Angola was finally able to sell all of its Sep cargoes given a large pricing discount and incremental Asian buyers. Dubai has also moved into contango with more barrels moving East, which may eventually send a signal to Saudi Arabia to pull back on production.Despite these positives, a number of headwinds still need to be overcome (see inside).

Higher aluminium prices on non-China output cuts, but risks ahead. Last week aluminium replaced zinc as the top performing metal in 2H14. We think sustained non-China production curtailment is the primary factor behind the strength, illustrated by declining exchange inventories and steepening near-term backwardation. Monthly production data for July began coming in last week, with Brazil’s output at a multi-decade low, as the legacy of weak pricing and high spot electricity prices prompted more curtailments. In fact, only the Gulf countries and China will grow primary output this year. This is a very positive development for a market that has been in structural oversupply since 2006.Nevertheless, we are wary that that these trends will lead to short-term pain ahead of longer-term gains, and price pressure is imminent (see inside for more details).

Inside:1) Challenges remain for global crude markets with more to come.

2) We believe aluminium price pressure is imminent and could last through year-end.

3) Bullish near-term developments for USGC crude.

4) Cushing may be set up to resume draws after next week..