Crude oil falls as supply risks ease
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
Easing supply risks saw energy markets end the week lower. Metals were buoyed by signs of stronger demand.?
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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Market Commentary
US tariffs continue to wreak havoc on the copper market. Extreme dislocations emerged on Friday, with a record gap between US and global prices. Copper on New York’s Comex spiked, with the premium over those on the London Metal Exchange reaching as high as USD1,200/t during the session. This was more than 10% of the benchmark LME price. This comes after Trump announced plans for reciprocal tariffs: new levies set on a country-by-country basis. This would be on top of tariffs already placed on steel and aluminium. Currently, there are no tariffs on copper imports. The red metal recorded a strong gain last week amid signs of stronger demand. China’s retail sales and industrial production are up, and the downtrend in developed economies is reversing. This has led to China’s copper imports rising strongly and inventories falling.
Iron ore fell as supply risks eased. Australia’s biggest iron ore port reopened, and Rio Tinto mines resumed operations after escaping damage from Tropical Cyclone Zelia. The port, which handles about 760mt per year, was reopened on Saturday. Fortescue, which also used the port, said minimal damage had been reported at its facilities. Concerns about US tariffs on steel were allayed somewhat by comments from the China Iron and Steel Association, which said they would have only minimal impact on the nation’s steel exports in the short term.
Gold fell sharply on Friday as the market’s concern over tariff-related economic headwinds eased. The market is coming around to the view that Trump is using tariffs as a negotiating tool. This follows his order for reciprocal tariffs, which could take weeks or even months to complete. In the meantime, he is willing to negotiate with individual countries. Despite Friday’s slump, gold ended the week higher, helped by renewed central bank buying. China’s PBoC added to its reserves for the first time in several months.
Crude oil slumped last week amid signs of ample supplies. The spread between spot and one-month futures for WTI were trading at USD0.01/bbl, down from USD1.52/bbl about a month ago. This suggests demand for physical oil is currently subdued. However, crude oil prices rallied early on Friday’s session after the US’s treasury secretary, Scott Bessent, told Fox Business that the US will seek to slash Iranian oil exports, which are currently around 1.6mb/d according to Bloomberg ship tracking data. He warned they could be cut to as much as 100kb/d. However, doubts emerged relatively quickly about the plan’s feasibility. Supply risks elsewhere are also easing. Kurdistan’s president, Nechirvan Barzani, said oil exports from the semi-autonomous region may resume by the end of March after being shut for almost two years. Trump is also pushing ahead with talks with Russia about ending its war with Ukraine. The countries’ top officials are slated to meet in Saudi Arabia this week.
Global gas prices fell last week on the prospect of easing competition in the LNG market. European countries including Germany called for exemptions from the European Union’s storage filling targets this year, which currently requires inventories to be 90% full by 1 November.?
Chart of the Day
The spread between copper prices on the New York Comex and the London Metal Exchange continues to balloon out as the threat of tariffs on the metal hang over the market.?