Russian Oil Stops Flowing to Parts of Europe – Commodities Roundup

— Gold futures were flat at $1,804.70 a troy ounce.

— Three-month copper prices moved 0.3% higher to $7,970 a metric ton.

— Wheat futures rose 1.6% to $7.93 a bushel.

TOP STORY:
Russian Oil Stops Flowing to Parts of Europe
Russian oil has stopped flowing through a pipeline that feeds countries in Central and Eastern Europe, dealing another blow to a region contending with the loss of vital energy supplies from Russia.
Transneft PJSC, the government-owned oil-pipeline operator, said Tuesday that crude exports through Ukrainian territory had halted on Aug. 4. It blamed payment difficulties caused by Western sanctions on Moscow and said Ukraine’s pipeline operator had declined to carry crude after it didn’t receive funds.
The move severs supplies through the southern branch of the Druzhba pipeline that carries oil to Slovakia, Hungary and the Czech Republic. The countries are heavily reliant on Russian oil and gas and are among the most exposed economies in Europe now that those supplies are getting shut off.
OTHER STORIES:
U.S. Solar Shipments Are Hit by Import Ban on China’s Xinjiang Region
The U.S. solar industry is confronting fresh disruptions as U.S. officials crack down on human-rights abuses in China’s Xinjiang region, which produces almost half the world’s supply of a crucial component in solar panels.
Several Chinese solar-panel suppliers, among the world’s largest, have had shipments to the U.S. detained or sent back during the past several weeks as customs agents enforce a new law, industry executives and analysts say.
The extent of the disruption is still hard to gauge: The Uyghur Forced Labor Prevention Act, or UFLPA, went into effect at the end of June, and importers, suppliers and customs agents are still feeling their way on what it will take to get goods into the country, the industry executives and analysts say.
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German Chemical Industry Hit Hard by Natural Gas Prices
Germany’s chemical industry has been hit hard by price rises for natural gas as the war in Ukraine continues, according to the Ifo Institute.
In a report on the chemical sector’s business confidence, the economic research group said business expectations fell to minus 44.4 points in July 2022, down sharply from positive sentiment of 11.8 points in the same month last year.
Russian gas deliveries to Germany since the invasion of Ukraine have been heavily curtailed, with prices in Europe more than doubling year-to-date and challenging industries like Germany’s chemical sector, which rely on the fuel.
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Norway Moves to Limit Electricity Exports
Norway could limit electricity exports to Europe if the water level in reservoirs used for its hydropower stations remain low, potentially removing much needed supply from countries already facing energy shortages this winter.
Around 90% of Norway’s power production comes from its more than 1,700 hydropower plants, but lower rainfall in southern Norway throughout the spring and summer has left reservoirs low, prompting the country to prioritize replenishing water reserves and securing domestic electricity supply, the government said in a statement late Monday.
In practice, this will involve control mechanisms that limit exports when reservoirs are low, and ministers will work this week to lay the framework to allow this new mechanism to be in place as quickly as possible, the government said.
MARKET TALKS:
Malaysia Palm Oil Rises on Indonesia Export Tax Hike
1054 GMT – Malaysian palm-oil prices closed higher, supported by top producer Indonesia’s move to raise export taxes on the edible oil, as well as by expectations that data this week will show that Malaysian exports rose in the first 10 days of the month, says Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics. At Indonesia’s current reference price for palm oil, tax per metric ton rises to $52 from $33 previously under the new regulation, he notes. The benchmark Bursa Malaysia Derivatives contract for October delivery closed 1.3% higher at MYR4,125 a ton. (yingxian.wong@wsj.com )
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European Gas Crisis Could Stretch Into Winter 2023
0934 GMT – High European natural gas prices and the gas supply crisis will likely stretch into next year as the continent struggles to replenish its depleted reserves without Russian gas flows, according to the Economist Intelligence Unit. Russia has curtailed its supplies through the Nord Stream pipeline to around 20% of capacity. The EIU expects those flows to fluctuate between zero and 20% in the coming months, making it challenging for European nations to fill their gas storage ahead of the high-demand winter period. But next year is unlikely to see any improvement and the winter of 2023 could also be challenging, the EIU says. “We expect a difficult 2023/24 winter as well, with high inflation and sluggish growth persisting until at least 2024.” (william.horner@wsj.com )
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Oil Lowers as Traders Consider Iran Nuclear Talks
0746 GMT – Oil prices are slipping, with the prospect of Iranian oil exports returning to global markets amid talks between the U.S. and the Middle East country. Brent is down 0.9% to $95.75 a barrel while WTI is down 1% to $89.87 a barrel. “The U.S. and Iran have weeks to decide whether they will revive the 2015 nuclear accord, which would open the door for Iran to resume oil exports,” Commonwealth Bank’s Vivek Dhar says in a note. “The deal rests on Iran eliminating their stockpiles of enriched uranium first before the U.S. lifts economic sanctions,” Dhar added, with European Union diplomats presenting the two countries with the final draft of the accord. (yusuf.khan@wsj.com )
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Sugar Production Costs Rise on Higher Natural-Gas Prices
0731 GMT – Sugar prices are expected to gather some support from higher natural-gas prices, amid falling European production. European production of sugar beets is expected to fall, with the continent experiencing a hot and dry summer, according to Commonwealth Bank of Australia analyst Tobin Gorey. “That fall leaves the market with a lot more refining to do. Refining though has gotten a lot more expensive with rises in natural-gas prices,” he says. As a result, Gorey says in a note that “the required premiums for Middle East refiners will be a lot more than usual. Precisely how much more is the sugar market’s ‘current thing.'” (yusuf.khan@wsj.com )
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Metals Rise as Macro Mood Improves
0729 GMT – Metals markets climb in early trading, with macro sentiment improving on lower risk drivers. Three-month copper is up 0.2% to $7,965.50 a metric ton while aluminum is up 1.1% to $2,466 a ton. “The macro mood feels better this morning,” Dave Whitcomb, head of research at Peak Trading Research says in a note. There was “a mild risk recovery” after Nancy Pelosi’s visit to Taiwan with agricultural commodities also being boosted by the improved sentiment, Whitcomb says. Most are looking to Wednesday’s U.S. consumer inflation data release, he says. “Investors and the Fed want to see a lower inflation print, which would help reinforce the ‘worst Fed hikes are behind us’ narrative,” Whitcomb says. (yusuf.khan@wsj.com )
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Iron-Ore Futures Fall Amid Higher Rate-Increase Bets
0210 GMT – Iron-ore futures are lower in the morning Asian session amid higher Fed rate-increase bets following last Friday’s stronger-than-expected U.S. employment report. These expectations are likely to weigh on risk sentiment, while bearish global headwinds begin to take hold once again in the industrial metal complex, say TD Securities strategists in a research report. Broad macroeconomic growth and recession fears, together with persistently reduced Chinese mobility amid the country’s “Covid-Zero” policy, are expected to offset any renewed bullishness, they add. The most-traded January 2023 iron-ore contract on the Dalian Commodity Exchange is down by 0.5% at CNY729.5 a metric ton. (ronnie.harui@wsj.com )
Write to Yusuf Khan at yusuf.khan@wsj.com