Morgan Stanley Commodity Report: Copper, Soybeans And Oil

Morgan Stanley's recent commodity report focused on copper, soybeans and oil. Here’s what analysts had to say.

Falling Copper A Buying Opportunity

Analysts were not expecting the 6 percent plunge in copper prices last week, and they see no fundamental reason for the decline.

The report suggests that the likely cause for the fall was technical selling in response to the downward movement in oil prices, and the illiquidity of the copper market exacerbated the slide. Analysts see no reason to believe there will be a fall in copper demand, and they continue to be bullish on copper in the long-term.

Soybean Exports Under Pressure

The USDA recently announced that 285 MT of soybean sales to China were cancelled, as South American offers more competitive prices this time of year. Analysts are predicting a decline in soybean prices, driven mostly by weakening export demand. “These dynamics may finally curb the upward revisions to USDA’s full-season export estimate.”

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No Comfort Found In Oil Data

Positive comments from the International Energy Agency (IEA), as well as declining U.S. rig counts temporarily halted plunging oil prices last week. However, Morgan Stanley warns that rig count reduction numbers can be misleading, because the lowest-quality (least productive) rigs will be shut down first, and those rigs likely have a disproportionally small impact on overall production.

Analysts predict that supply pressures will continue to drive prices down in the first half of 2015. Continuing supply growth momentum coupled with seasonal weakness in crude oil demand and storage economics will continue to weigh on oil.