Aluminium gains on EU plans to sanction Russia metal
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
A weaker USD helped boost investor appetite in the commodity complex. Supply side issues across energy and metal sectors were also supportive.
Prices and commentary accurate as of 07:00 Sydney/05:00 Singapore/17:00(-1d) New York/22:00(-1d) London.
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Ahead Today
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Market Commentary
Crude oil extended recent gains on the prospect of tightening supplies. Oil exports have fallen by as much as 30% from a major Kazakh pipeline to the Black Sea. This came after operations were halted when a Ukrainian drone attacked a pumping station in Russia. The market is also weighing up whether OPEC is serious about delaying its planned production hikes. A Bloomberg report earlier this week suggested that OPEC+ delegates are said to be discussing such a scenario as prices linger well below levels they appear comfortable with. The market shrugged of reports that sanctions relief for Russia may be on the table in peace talks. US Treasury Secretary Scott Bessent said that the US is ready to take down penalties based on the Kremlin’s willingness to negotiate. The apparent shift in US support for Russia has taken the G7 by surprise. The group had been considering tightening the current Russian oil price cap of USD60/bbl to reduce Moscow’s revenues. However, they are now struggling to agree to the exact terms for the plan.
European natural gas futures dropped to their lowest level in over a month as concerns about supply tightness ease. The ratcheting up of pressure by the US on Ukraine to accept terms of a potential peace deal with Russia is also leading to expectations of a resumption of pipeline gas flows from Russia to Europe. Increasing numbers of US LNG cargoes into Europe are also easing these concerns. Pipeline gas flows to US LNG export plants climbed to 15.7bn cubic metres on Tuesday, according to Bloomberg data. That’s an all time high and almost 20% more than a year ago. The shift in trade has tightened up the Asian market. North Asia LNG prices have been pushing higher this week as the availability of LNG cargoes falls.
There was a broad rally across the base metal sector as a weaker USD helped boost investor appetite. Aluminium led the sector higher after reports that the European Union backed a ban on Russian metal. EU Ambassadors agree to move forward with a fresh package of sanctions against the key supplier. These include a gradual ban on imports, restrictions of dozens of vessels and prohibiting about a dozen banks from accessing the SWIFT international payment system. The ongoing weakness in the nickel market is starting to take its toll on the Indonesian industry. One of its biggest nickel smelters has slashed production and is close to shutting down. The owner, PT Gunbuster Nickel Industry, is said to be delaying payments to local suppliers and is unable to secure nickel ore.
Gold traded higher early in the session, as the weaker USD boosted investor demand. However, it gave back much of these gains after Bessent dismissed speculation that the government might revalue its bullion holdings. Its current reserves are valued at USD42/oz set in 1973. If current prices were used, it would deliver a one-time windfall of around USD750bn for the government and reduce the need to issue bonds. The dislocations in the physical market continue to play out. Switzerland’s gold exports to the US hit 193t last month, the highest ever level. It’s also greater than the entire value for all of 2024. This was driven by concerns that the precious metal would be caught up in President Trump’s tariff war.?
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Chart of the Day
Renewed sanctions on Venezuela could have a significant impact on the oil market. Exports are currently around 600kb/d but were are expectations of this rising to nearly 1mb/d in 2025.?
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5in5 with ANZ Podcast
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Director , Asia Agro Produce Pte Ltd
1 周Love this
Senior Commodities Manager - Jyske Bank
1 周And Cooper seems to be all over the place these days. Wild massive swings with a contango-curves moving to backwardation quicker than I had the morning-coffee. Hold on tight and do some risk management ??