Home Commodities Shell Takes $3.9 Bln Charge Related to Russia Exit — Commodities Roundup

Shell Takes $3.9 Bln Charge Related to Russia Exit — Commodities Roundup

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–Brent crude oil rises 0.8% to $110.89 a barrel.

–Benchmark European natural gas futures rise 2% to EUR105.90 a megawatt hour.

–Gold prices rise 1.6% to $1,898.20 a troy ounce.

–Copper prices on the LME rise 0.5% to $9,561 a metric ton.

TOP STORY:

Shell Takes $3.9 Billion Charge Related to Russia Exit

Shell PLC said it took a $3.9 billion post-tax charge related to its decision to exit Russia, only slightly denting an otherwise strong quarter bolstered by soaring commodity prices.

The charge was expected and came alongside robust oil and gas trading profit during a period of extreme volatility. Shell’s first-quarter profit on a net current-cost-of-supplies basis–a figure similar to the net income that U.S. oil companies report–was $5 billion, compared with $4.3 billion a year earlier when its performance rebounded from low pandemic energy demands.

Soaring oil and gas prices have showered the biggest producers with cash, which they are largely using to reduce debt, accelerate share buybacks and otherwise reward investors, rather than increase exploration and other capital spending.

Shell said Thursday that it had completed $4 billion of $8.5 billion in share buybacks it plans through the first half of this year. Its adjusted earnings stripping out certain commodity-price adjustments and one-time charges beat analysts’ consensus forecast for the quarter. Shares rose more than 3% in early trading.

OTHER STORIES:

Russian Oil Ban, Ukraine War Present Risks to Global Economy, Janet Yellen Says

Treasury Secretary Janet Yellen said the U.S. economy remains strong despite the fact that it shrank in the first quarter of this year, adding that both persistently high inflation and spillovers from the war in Ukraine present economic risks.

“The outlook is very uncertain. The dangers at the global level are high,” she said. “I do worry about commodity prices, I am worried about spillovers from Russia and Ukraine that can have adverse impacts not just on the U.S. that is strongly positioned, but on Europe, on emerging markets.”

ArcelorMittal 1Q Earnings, Sales Rose on Higher Steel Prices

ArcelorMittal said first-quarter earnings and sales rose as higher steel prices overcame a decline in shipments due to the war in Ukraine.

Europe’s largest steelmaker said Thursday that net profit was $4.13 billion in the three months to the end of March, up from $2.29 billion in the same period last year.

MARKET TALKS:

EU Russian Oil Ban Would Prompt 2.8 Million B/D Supply Disruptions

1029 GMT – The EU’s plan to ban imports of Russian oil could see production shut-ins in Russia grow to 2.8 million barrels a day in August, S&P Global says. The bloc’s plan aims to phase out 2.3 million barrels a day of Russian crude imports within six months. For energy markets, the key question will be how successful Russia can be at redirecting those shunned supplies to other buyers in Asia. Russia’s pipelines heading east were close to capacity even before the war so Russia would need to rely on seaborne shipments, S&P Global says. The EU is reportedly considering sanctions, making it harder to ship and insure Russian crude cargoes, which “would increase the difficulty of redirecting cargoes to willing buyers elsewhere,” the firm says, in a note to clients. (william.horner@wsj.com)

Coffee Prices Rise on Firm Global Demand

0944 GMT – Coffee prices rose in April as strong global demand outweighed a bump in exports, according to the International Coffee Organization. The ICO Composite Indicator Price rose 1.8% in April from March, with prices averaging 198.37 U.S. cents a pound last month, the ICO says. Total exports of all forms of coffee reached 13.16 million bags compared with 12.65 million bags in April 2021, up 4.0%. World coffee consumption is expected to grow in the current 2021-2022 season to 170.3 million 60-kilogram bags compared with 164.9 million for 2020-21. Total production is expected to remain unchanged at 167.2 million bags, a 2.1% decrease from 2020-21. (yusuf.khan@wsj.com)

EU Oil Embargo Isn’t Likely to Hit Russia’s Economy Hard in the Short Term

0829 GMT – The EU proposal to end imports of Russian crude oil and petroleum products by the end of the year won’t cause major pain for Russia’s economy immediately, Capital Economics’s commodities economist Edward Gardner says in a note. If approved, the ban would cause a fall of around 20% of Russia’s oil exports this year, which in turn would keep oil prices at more than $100 a barrel, he says. Even if a loss of oil exports to the EU could hurt, Russia is benefiting enormously from high gas prices and looks set to register a substantial current-account surplus this year, Gardner says. “Global commodity prices will need to fall significantly, and exports to non-Western countries fall sharply, before sanctions on Russian energy bite hard,” he says. (xavier.fontdegloria@wsj.com)

Oil Hovers Ahead of OPEC Meeting

0757 GMT – Oil is little changed as the prospect of an EU oil ban balances out China-related demand concerns. Brent crude oil, the international oil benchmark, is up 0.2% at 110.32 a barrel. Brent rallied Wednesday, rising to its highest level in almost three weeks after the EU announced a plan to ban Russian oil imports. But, concerns about Chinese lockdowns weighing on demand for oil are posing a big headwind. “Oil prices are struggling to hold higher ground…mobility restrictions in China and growing recession risk are damping sentiment,” SPI Asset Management says in a note. Looking ahead, OPEC+ is expected to stick to its plan for modest output hikes, when the cartel meets Thursday. (william.horner@wsj.com)

Copper Rises Following Fed Rate Hike

0739 GMT – Copper futures in London are rising after the Federal Reserve increased interest rates on Wednesday by 50 basis points, with three-month futures up 1.3% to $9,638 a metric ton. Base metal prices have rebounded somewhat after they had been falling sharply prior to Wednesday, as weak uptake in China dampened sentiment. China’s services Caixin PMI reading fell to 36.2 in April from 42.0 in March and shows how sharp the contraction has been in China since lockdowns were implemented. That said, investors seemed to have been boosted by the fact that the Fed limited its increase to just 50bp, indicating less economic weakness than expected. (yusuf.khan@wsj.com)

Brent Crude May Be Poised for a Move Up, Charts Show

0732 GMT – Brent crude’s consolidation seems to be coming to an end, based on technical charts, UOB’s analyst Quek Ser Leang says in a research report. Brent’s upward momentum is starting to build after it rose above resistance on the downtrend line connecting the highs of $123.74/bbl and $114.85/bbl on Wednesday, the analyst says, noting that its daily moving average convergence-divergence indicator is rising. If Brent crude breaks above the April high of $114.85/bbl, and more importantly, the top of the daily Ichimoku cloud, which is at $116.00/bbl, the possibility of a breach of $123.74/bbl would increase considerably, the analyst says. Front-month Brent crude oil is up 0.1% at $110.28/bbl. (ronnie.harui@wsj.com)

Gold Rallies Following Fed Rate Increase

0724 GMT – Gold prices are rallying after the Federal Reserve increased base interest rates by 50 basis points on Wednesday, with futures in New York up 1.6% to $1,898.20 a troy ounce. Suggestions that the central bank could have increased rates by 75 basis points were raised, but this was ruled out by Fed Chairman Jerome Powell, leading to a decline in interest for the dollar and U.S. Treasurys. “The Federal Reserve was not as hawkish as the markets had been braced for,” Stephen Innes, managing partner at SPI Asset Management, says in a note. Innes adds that while the Fed was “not maxed hawkish,” it was neither dovish, noting that “Powell repeatedly emphasized how tight the labor market was and how far above-target inflation is.” (yusuf.khan@wsj.com)

Write to Will Horner at william.horner@wsj.com

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