Iron ore had been looking vulnerable earlier in the week with the daily candles for the last 3 day’s closing higher but lacking any real momentum with the candles producing small bodies. The technical aspect of the market looks like it could exhaust soon; however, rising steel prices, a small easing in the stockpiles and rising steel margins have kept the futures well supported. Bloomberg steel margins have finished the week at CNY 302, up 50 CNY in three days, suggesting the trend might not be over just yet. The technical says the trend is exhausting; but without a drop in the margins the mills will continue to draw ore and maintain a high output to satisfy evidential demand.
Capesize futures had been threatening an upside move in the early part of the week, with downside price action failing to follow through on more than one occasion. The physical has been showing signs of improvement, leaving the December to close out the week USD 1,400 off the low, at USD 13,500, + 0.9% from yesterday and up USD 125 on the week. There is indecision in the Capesize market at these levels, seasonality would point to a small rally which could be the only reason the market is seeing support. Miners have been taking ships, but the urgency is not there. If the daily futures close above the 55 period MA and hold above it then, we could have a situation where the market becomes self-fulfilling, as charters will then be obliged to cover contracts. Q1 futures closed + 1.5% at USD 8,225 and the Cal 21 + 0.2% at USD 12,975.
The Panamax market was up 4.7% last week and 7.7% this week. Sentiment remains good and the market is well supported, but the futures have finished the week flat. December closed -0.7% to USD 10,600, the Q1 21 +0.7% to USD 8,625 and the Cal 21 +1% at USD 9,975. Next week will be make or break for the Panamax, if we correct at these levels there is still a vulnerability to the market. However, if we keep pushing then this pullback could have enough legs to give it a 12k handle in the coming weeks.
Supramax futures were very quiet today, rates were slightly firmer, but the reality is there was very little changing hands outside of the Cal 21. Dec closed the week at USD 10,275 +0.7% with the Q1 21 at USD 8,150 and the Cal 21 at USD 9,112; both up 0.3%.
The Brent futures continue to hang in there with price trading at USD 44.45 + 0.6% but still has not made that higher high that we were looking for earlier in the week. Headlines still aim towards the COVID vaccine, with futures up for a third week in a row, and they are but for the last 3 days oil has not really moved. Oil is not ready to go down, the technical has not been enough to push it up, so now we need some good news. If we get it, then we still think this could trade with a USD 48 handle. If we do not, then the 3 days of a rudderless market that we have witnessed might leave the futures starting to look like a sell.
Does Oil have a Thanksgiving rally?
It is a wrap
Data source FIS and Bloomberg
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