Slowing demand weighs on prices – TDS

Crude oil prices at $70/bbl may feel overpriced, but there are no signs of a reversal in demand sentiment just yet, notes TDS Senior Commodity Strategist Daniel Ghali.

The market move does not support a sustainable recovery

“The cross-section of commodity yields shows a bleaker picture of commodity demand, with no signs of recovery despite the strength implied by risk markets. For energy markets, however, the risk is two-fold, as the demand slowdown not only affects prices through its traditional implications, but also implies that the substantial amount of supply risk premiums embedded in prices should be further eroded.”

“The decision by the OPEC+ group of producers to delay planned supply increases has not been enough to halt this trend, and the further slowdown in global demand risks catalyzing a more substantial repricing against this backdrop. CTA may be up for auction, but the market tone does not yet support a sustainable rally.”