Mercantile Exchange of Vietnam (MXV) reported that global commodity prices experienced a sharp decline during the week of September 2-8. Strong selling pressure caused the MXV-Index to drop by nearly 3.5%, falling to 2,061 points—lower than the nearly four-year low recorded in June 2023. By the end of the week, except for the agricultural market which managed to maintain its recovery momentum, other commodity groups saw significant declines. Energy and base metals were hit the hardest, with prices plunging between 3% and 10%.

Oil Prices Hit 9-Month Low

Oil prices ended the week of September 2-8 with five consecutive days of decline amid concerns about slowing global oil demand, despite signs of extended production cuts by OPEC+ in October and November. By the end of the week, WTI crude fell 7.99% to $67.67 per barrel, while Brent crude dropped 7.63% to $71.06 per barrel—the lowest level in nine months.

August's U.S. employment report heightened fears of a weakening labor market, indicating an economic slowdown. The U.S. Department of Labor reported that only 142,000 new non-farm jobs were added in August, significantly below the 161,000 forecast by Dow Jones. Although the unemployment rate fell by 0.1 percentage points to 4.2%, aligning with the Federal Reserve's (FED) target, it was not enough to ease the sell-off in the market.

Citi Bank also warned about the ongoing pressures in the oil market, lowering its forecast for the average global oil price to $60 per barrel for next year due to declining demand and increased supply from non-OPEC countries. Additionally, the resolution of disputes in Libya, where legislative bodies agreed to appoint a new central bank governor within 30 days, could restore the country’s production of around 700,000 barrels per day. This development overshadowed OPEC+'s announcement of extending voluntary production cuts into October and November.

Several banks have also lowered their oil price forecasts for the end of the year. Bank of America reduced its Brent crude forecast for the second half of 2024 to $75 per barrel from nearly $90, based on calculations of global stockpiles, demand growth, and OPEC+’s spare production capacity.

Red Dominates Metal Prices

All 10 metal products recorded price declines at the end of the last trading week. Precious metals such as silver and platinum saw their prices fall for the second consecutive week by 3.29% and 1.45%, respectively. The precious metals market continues to be volatile amid mixed expectations regarding the FED’s interest rate policy.

The market is almost certain that the FED will pivot its policy during its meeting on September 17-18. The key question for investors is whether the FED will cut rates by 25 or 50 basis points. As FED officials have emphasized, the size of the rate cut will depend on upcoming economic data, leading to ongoing shifts in rate cut expectations.

Last week, the U.S. Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS) and ADP’s private payroll report reflected continued weakness in the U.S. labor market, increasing expectations of a 50-basis-point cut. However, the U.S. Labor Department’s payroll report, released at the end of the week, showed a more optimistic signal as the unemployment rate fell by 0.1 percentage points to 4.2% in August, despite the continuing decline in new jobs. These mixed signals left the market uncertain about the extent of the FED’s rate cut, limiting investment flows and contributing to the drop in precious metal prices last week.

Base metals also suffered steep declines, with prices falling between 4% and 9%. Iron ore led the downturn, plunging 9.23% to $91.7 per ton. The primary reason for the sharp drop in iron ore prices was weak demand from China. As of the week ending September 5, iron ore inventories at Chinese ports rose to 154.1 million tons, the highest level since April 2022, marking a 0.2% increase from the previous week.

Furthermore, the bleak outlook for China’s steel industry has added significant pressure on iron ore demand, as iron ore is a key raw material in steel production. Analysts from ING noted that steel demand in China is expected to continue falling as the country’s real estate sector remains in a downturn.

Soure: MXV