European gas rallies amid rising fears of Russia supply disruptions

Commodity markets rebounded as the prospect of a de-escalation in the Ukraine conflict waned. Once again it was the energy sector which led the complex higher. Demand for safe haven assets saw precious metals also rise.

Crude oil?prices rose after peace talks between Russia and Ukraine failed to produce a breakthrough. Ukrainian President Volodymyr Zelensky said that Russia is sending new forces as attacks continue on Kyiv. The impact of restrictions on Russia oil is already having an impact, with oil data analytics firm OilX estimating that output fell below 11mb/d in the second half of March. High oil prices may also be weighing on demand, with US gasoline demand falling for the third consecutive week, according to EIA data. The US department also reported that US crude oil stockpiles fell 3.45mbbsl last week, due in part to another withdrawal of 3mbbls from the strategic reserve. The US also exported more oil than it imported, the third week in a row this has occurred. This comes ahead of the key OPEC meeting. The group slashed its projections for a first quarter surplus by 600kb/d in its monthly oil market report. However, comments from members suggest they will rebuff calls for a larger than normal increase in supply.

European natural gas?prices surged higher as fears of disruptions to Russia gas rose. Top consumer, Germany, activated an emergency plan to brace for a potential cut to Russia gas. This announcement comes ahead of Kremlin’s plans to tell European energy companies on Thursday how to pay for fuel in roubles. European nations have indicated they will not give into these demands, raising the prospect of disruptions to supplies. France is also preparing for a potential curtailment to energy supplies, with the government likely to publish a decree that outlines plans for possible gas rationing. Front month Dutch future ended the session up 10% to EUR118.97/MWh.?North Asian LNG?futures edged higher amid the spectre of increased competition for LNG cargoes. Tightness in the Asian market is being exacerbated by disruptions to Qatar output. Qatargas LNG Train 6 has been shut, which has led to the largest number of empty LNG tankers sitting off the coast in a year.

The prospect of gas rationing in Europe saw?European carbon emissions?drop sharply. The emergency plans in Europe could see demand for carbon permits fall. This saw EUAs give up two days' worth of gains to end the session down 4.2% to EUR78.3/t.

Base metals?regained some of Tuesday’s slump, with traders’ focus returning to the continued threat to supply from Russia. Aluminium led the gains as the market faces supply shortages in raw material feed following?Australia’s ban on alumina exports to Russia. Russian producer, United Rusal, warned that its operations could be impacted if pressures from war and sanctions persist or deepen. Nickel also jumped on thin volumes on the London Metal Exchange. Volumes have plunged sharply since trading resumed following the short squeeze that pushed prices to USD100,000/t. The gains were muted as the market keeps an eye on China. Recent lockdowns in Shanghai are raising concerns that demand for metals could be impacted.

Gold?prices gained following the strong US jobs report, which underlined the inflationary pressure in the economy. Safe haven buying was also prevalent following the breakdown in talks between Russia and Ukraine. Spot gold rose as much as 1% to USD1938/oz before easing lower into the close. Palladium was also up sharply amid the supply disruptions fears in Russia.

Iron ore?futures rose on increasing optimism that Chinese demand will bounce back quickly from lockdowns. The Chinese steel making hub of Tangshan has suffered disruptions amid the restrictions. However, the government has promised to support the economy in coming months.