Precious Metals reverse trend; oil prices steady on US-Russia talks

March 31, 2020

London (Mar 31)  Oil prices recovered ground after reports suggesting that the US and Russia agreed to talk on stabilising oil markets after the recent slump in prices and increasing glut. WTI prices are up 5.57% to $21.23/bbl whereas Brent is higher by 2.88% to $27.18/bbl. The talks between US and Russia come at a right time after Saudi Arabia refused to indulge in talks with OPEC+ member Russia which further weighed on prices. With the market anticipating a positive development, the oil market structure has also moved in contango which indicates higher prices in the future – the discount between Brent May and November futures is around $13.00 which is the highest spread ever seen. Crude prices are likely to draw further support from the fact that oil refiners are cutting on production as demand continues to wane. The price reaction has remained largely muted on concerns of how fruitful the talks between producers would turn out to be.

MCX Crude Oil is trading Rs.1666.0, up over three percent and is trading with a neutral bias. In the short term, we expect prices to enter into a bullish mode if prices close above resistanace at Rs.1750.0 whereas a break below Rs.1600.0 could trigger fresh selling in prices.

Base Metals are trading higher today Zinc leading gains at Rs.145.20, up 2.22% followed by Copper and Lead, both higher by nearly 1.5% at Rs.377.75 and Rs.133.70 respectively. Base Metals have been trending higher over the past few days driven by a recovery in Chinese activity and stimulus packages from central banks across the globe but it is too early to comment on a price bottom in metals. Major copper production hubs Peru and Chile recently announced a national state of emergency, causing producers in both countries to halt production. Similarly, a coronavirus-related lockdown in India has also seen Indian producers halt operations. The upbeat sentiment has been largely driven due to supply disruptions and we expect a sizeable recovery in metals only when the demand side of the picture emerges. In intraday, we continue to maintain a bullish picture on prices.

Precious Metals are trading sharply lower today with Gold futures at $1610.60, down nearly two percent whereas Silver is down 0.16% to trade at $14.10/oz currently. The overall bias continues to remain bearish and we expect prices to decline further in the next few days. Gold futures, traded on MCX, may decline to Rs.42000.0 whereas Silver may decline to Rs.37500.0 from current levels.


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