Global commodity open interest value drops to 5-month low amid macro contagion – JPM

Amid the wider macro meltdown, the estimated value of open interest across global commodity markets declined to a five-month low of ~$1.38 trillion, declining by -1.4% week-on-week, after crude oil markets sold off, JPM Commodities Research said.

As of Aug 02, outflows continued across global commodity markets for a consecutive week, totalling -$6.9 billion week-on-week, mainly concentrated across crude oil markets and precious metals, while petroleum products and grains & oil seeds market registered modest inflows over the week.

The estimated value of open interest in precious metals markets rebounded slightly to ~$196 billion, up by +$1.4 billion in the Aug. 2 week, while the those in the energy markets decreased by -3% to $620 billion driven by crude oil and petroleum products as both WTI and Brent prices sold off significantly through the week, JPM added.

JPM analysts, however, continue to project Brent prices close to $90 by September 2024 and $63 by December 2025, “flagging the strength of global demand and a fundamentally weak 2025 as the main hurdles for Brent crude prices to reach $90.”

U.S. crude oil futures slumped to their lowest settlement in six months Monday but recovered from sharp declines at midday after a wild morning trading session when the highs and lows for crude were separated by $2/bbl or more.

Oil prices were pulled down largely by the continued rout in global equity markets, sparked by fears that the U.S. economy may be heading toward a recession.

ANZ Research however noted that rising geopolitical tensions should help support oil prices and reverse losses from the recent sell-off.

Base metals were also not immune from the global selloff amid concerns of weaker demand in China. “We expect this to reverse in the second half of 2024. However, the supply response will be a dominating factor to rebalance metal markets,” ANZ further added.

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