Can the Oil, Iron Ore Rally Last?

Oil and iron ore prices have bounced over the past few days as the U.S. dollar has weakened, but can the rally last?

Maybe not says ANZ's senior commodity strategist Daniel Hynes, who is concerned about inventories weighing on prices:

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The problem for iron ore is rising supply from Chinese and Indian producers. Hynes notes that Chinese production of the steel making ingredient rose 15% year-on-year in the first quarter and that China's domestic production has been on the rise since prices bottomed in 2016.

Indian iron ore exports reached 22 million tonnes in 2016 but now they're on target to reach this amount fairly shortly given exports were up 218% year-on-year in May to 17 million tonnes.

Oil continues to be dogged by high inventories as well despite the extension of the production cuts by OPEC and Russia. OECD commercial inventories are around 3 billion barrels, though there has been a slight drawdown in the U.S., Japan and Europe. Here's Hynes again:

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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