Metals fall amid signs of weaker demand in US
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
Commodity markets drifted sideways as they contemplate the geopolitical backdrop. Easing supply side issues also weighed on sentiment.?
Prices and commentary accurate as of 07:00 Sydney/05:00 Singapore/17:00(-1d) New York/22:00(-1d) London.
?
Ahead Today
?
Market Commentary
Crude oil managed to end the session higher as the market contemplates geopolitical factors. Traders are monitoring the possible return of several hundred thousand barrels a day of Iraqi crude flowing via Kurdistan. Iraq said that it may restart exports as early as this week should a pipeline to Turkey resume operations. While that could see an additional 185kb/d of oil hit the market, the Iraq oil ministry said its total exports will remain within OPEC limits. The market is also keeping a close eye on negotiations to end the Russia-Ukraine war. A settlement could see sanctions on Russia ease, potentially raising export flows. Meanwhile, OPEC is discussing what its next move on supply will be. There have been reports that members are discussing whether they should delay the planned hikes schedule for April. Aside from the uncertain geopolitical backdrop, OPEC member states face rising breakeven levels for their oil, putting pressure on their fiscal budgets. Given the uncertainty, we expect OPEC will delay the production hikes for the fourth time.
European natural gas futures steadied as concerns that last week’s selloff was overdone. The price drop may lead some sellers to seek better deals elsewhere. This appears to be behind the diversion of an LNG shipment from Qatar away from Europe recently, ship tracking data from Bloomberg showed. Nevertheless, supply side issues linger. US efforts to end Russia’s war in Ukraine have raised the possibility of the resumption of pipeline gas flows from Russia to Europe. For the moment, that appears to be off the table, with the European Commission instead moving ahead with plans to phase out Russian LNG imports. Demand also looks sluggish in the short term. Above average temperatures are currently easing pressure on inventories. North Asia LNG prices rose as pockets of stronger demand emerged in countries including Taiwan and Thailand. This has helped offset softness in Chinese demand. Data earlier this week showed Chinese LNG imports were 13% below the five-year average.
Gold touched another all-time high as investors continue to pile into the precious metal. Mounting concerns over President Trump’s disruptive trade and geopolitical agendas are driving strong haven demand. To date, investor activity has been focused on the futures market, but in recent weeks there has been a discernible increase in physical flows in gold-back exchange traded funds. Those ETFs saw their biggest net inflow since 2022 last week. The holdings are now at their highest level since January 2024.
Aluminium led the base metals sector lower as sentiment remain cautious following weak US economic data. Business activity this month expanded at its slowest rate since September 2023, according to S&P Global data. Long term inflation expectations among American consumers reached their highest level in almost three decades. These offset concerns of supply disruptions. Reports suggest the European Union is backing a ban on Russian metal amid a broader sanction package, as the fallout from US efforts to broker a peace deal directly with Russia continues. Iron ore prices were also lower, as data showed a pick-up in supply which weakened support for the steelmaking raw material.?
?
Chart of the Day
Holdings of gold-backed ETFs has surged in recent weeks, as investors boost their haven asset allocation.?
?
5in5 with ANZ Podcast
?