Oil and silver rise. Chinese economy stronger than expected

15.05.2020 10:58|Conotoxia Ltd Analyst Team

In our previous comments on the oil market as well, we pointed to the possibility of stabilizing the situation as production falls and individual economies open up. This has now been complemented by a faster recovery in China, which surprised positively, and the demand for industrial commodities seems to be growing.

Industrial production in China increased by 3.9% in April from the same month of last year, according to data published on 15 May. The market consensus was only 1.5%, so we were positively surprised. This was the first increase in industrial production since December last year. The economy is slowly recovering from the crisis caused by the epidemic.

There has been an improvement both in manufacturing output (5.0% against -1.8% in March) and in the public utility sector (0.2% against -1.6%). The main branches of the industry saw an increase in the production of electrical machinery (9%), metal products (8.9%), food production (7.5%), and the automotive industry (5.8%).

As the situation in China calms down, the demand for oil is also growing, with a simultaneous drop in oil production worldwide. WTI oil prices on Friday exceeded USD 28.8 per barrel, as a result of which oil is the most expensive in a month. In April, China processed a total of 53.85 million tonnes of oil, equivalent to approximately 13.1 million barrels per day and higher than 11.78 million barrels per day in March, according to official data. Oil in the USA is already on the rise for the third week in a row, as production cuts by some of the world's largest producers together with plans to alleviate restrictions are a potential relief to this market.

The silver market may also deserve attention. The price of the metal has increased to the highest level since the first half of March. An ounce of silver costs more than 16 USD, in mid-March it was just over 11 USD. The demand for silver is created mainly by the industry, and only to a lesser extent by jewelers or the financial sector. Therefore, as the situation in this one of the main sectors of the economy improves, a permanent return on the silver market can appear.


Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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