More tough conditions ahead for commodities as traders try to work out just where prices will be heading in the wake of a rough week at times.
The OPEC+ meetings are out of the way for another month, China’s weakened commodity demand will be underlined today in April’s trade data, Russia will also try and claim victory in Ukraine, or one of its bombed-out cities, easy money is ending and interest rates are on the rise.
Inflation concerns continue and will give a us another reminder midweek with consumer price data from the US and China due for release.
Overall a sort of situation normal for markets given the volatility and disruption since Russia’s late February invasion of Ukraine.
Inflation in the US will return to centre stage midweek but with a half a per cent rise from the Fed and rising rates in the UK (again), NZ, Australia (first up) and India (first up again in this cycle), don’t be surprised if traders, investors, analysts keep making a noise about the vulnerability of demand and possibly prices, not not while the EU sorts out its embargo on Russian oil.
OPEC+ has once again decided to stick to its roadmap, which consists of slightly increasing its production. The enlarged cartel is expected to increase its supply by 432,000 barrels per day starting in June, a target that will probably not be met since OPEC+ is already struggling to meet its production quotas.
Fears about the level of Chinese demand and imports will become visible today with the April import and export data from China later today – the amount of oil, gas and coal will be watched closely.
Small Chinese refiners are importing Russian crude (as are Indian refiners) but their demand will fall short of the 4.5 million barrels a day of oil and oil products (petrol etc) that Russia sends into European markets.
If the likes of the Saudis see Russian crude imports displacing its own in India and Asia, watch for an angry reaction and perhaps some price cutting along the lines of that by the Saudis and Russia which damaged oil pricing in the first wave of the pandemic in 2020.
Brent crude settled at $US112.39 a barrel, up on the day and more than 6.7% for the week while the US benchmark, WTI, settled at $US109.77 a barrel, up 6.2% for the week.
The number of active drilling rigs in the US rose by 7 last week, after an increase of 3 rigs in the week prior, according to the weekly report from Baker Hughes on Friday.
The total rig count rose to 705—257 higher than this time in 2021. Drillers have added 55 rigs over the last ten weeks.
The number of oil rigs in the US rose by 5 rigs to 557, while gas rigs numbers edged up by 2 to 146. Miscellaneous rigs stayed the same, at two.
The continuing Covid pandemic in China has hit sentiment about industrial metals with copper feeling the brunt – down again last week by more than 3% to $US4.25 a pound on Comex. That’s a loss of 10% on the past month as Shanghai and other cities were locked down.
Nickel is also losing ground at $US30,190 tonne despite solid demand from the EV and steel sectors. China is again the negative factor.
And gold rose but struggled to gain traction amid all the interest rate rises.
Gold prices are still trading below $US1,900 an ounce. Comex metal settled at $US1,882.80 an ounce on Friday, down 0.7% for the week after the 0.50% rate rise by the Fed took some of the wind out of its sales.
Grain prices remain generally well oriented. The lack of rain in Europe could have an impact on the development of crops, especially wheat and corn.
In Chicago, the price of wheat recovered to 1,110 US cents a bushel. On the other hand, corn lost some ground at 780 US cents. New York sugar continues to trade around 19 US cents a pound or a bit more.
May thermal coal rose to $US379 a tonne, according to the Newcastle ICE thermal coal index.
Singapore iron ore futures ended at $US137 a tonne on Friday from around $US146.77 the previous Friday.
Meanwhile Vale, the big Brazilian miner, confirmed on Friday that it had formed up a deal with Tesla to supply it high grade battery quality nickel.
Tesla has agreed to a long-term deal to buy Canadian nickel from Vale. Tesla already has a similar deal with BHP covering nickel sulphate crystals from BHP’s WA operations south of Perth.
Under the deal Tesla will purchase nickel from Vale’s mines in Canada (at Sudbury and the huge Thompson mine), which produced 76,000 tonnes of the metal last year.
Tesla in January said it would purchase 75.000 tonnes of nickel concentrate from a project being developed by Toronto-listed Talon Metals. That followed a deal with BHP to buy material from its operations in Australia.
Tesla has also agreed to buy nickel from a mine in New Caledonia that is part-owned by commodity trader Trafigura.