Oil gains as OPEC consider delays to output hikes
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
Oil rose as OPEC considers more delays to production hikes. Metals markets were mixed as the they adjusts to impending US tariffs.?
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
Crude oil rose after reports that OPEC is considering delaying further production hikes. Global oil markets remain too fragile for OPEC+ to revive production now, a group delegate told Bloomberg. A decision is yet to be made, and the group is split on how to proceed, another delegate said. Supply disruption also supported prices. A Kazakhstan oil export pipeline was operating at a reduced rate after an attack by drones, the facilities operator said. The conduit was due to ship about 1.6mb/d this month and next. This offset some bearish factors. Iraq’s oil minister said exports from the semi-autonomous Kurdistan region may resume within a week. That could see the return of more than 300kb/d to the market. The market is also watching the progress of US policies. Last week, the Treasury Secretary Bessent said the US will seek to slash Iranian oil exports. 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.
European natural gas prices slumped as supply risks ease. Concerns over refilling storage facilities have eased as countries push for more flexible targets. The EC currently requires inventories to be 90% full by 1 November. However, temperatures in Europe’s northwest are expected to rise above seasonal norms in coming days. European imports of LNG have also surged recently, helping slow the drawdown in inventories. The 10-day moving average of Europe’s daily LNG imports was at 245kt on 13 February, 68% higher than their five-year average.
Base metals were mixed as they deal with dislocations created by US tariffs. A rebound in the USD also weighed on investor appetites. Copper spreads tightened in a sign that the chaotic market moves driven by US tariffs may be easing. The wide premium that cash contracts commanded over three-month futures on the LME flipped into a USD50/t discount during the session. Last week, copper on New York’s Comex spiked, with the premium over stock on the London Metal Exchange reaching as high as USD1,200/t during the session. However, aluminium spreads flared into a steep bullish pattern. February futures traded at a premium of as much as USD27/t over March contracts, suggesting near-term tightness in supply.
Gold recovered from Friday’s sharp selloff as nervousness over Trump’s latest trade threats rose. Traders remain concerned that his reciprocal tariff plan will heighten global trade tensions. The latest threat includes levies on automobiles, which could come as soon as 2 April. However, the gains were muted as traders await more details. Traders were also weighing up what the latest economic data means for the outlook for interest rates. A report on Friday showed retails sales slumped by the most in two years. This prompted the market to raise bets on an interest rate cut by September.
Iron ore prices eased, as the market adjusted to the fading impact of Western Australia’s Tropical Cyclone Zelia. With the resumption of exports from Australia’s biggest iron ore port the market is shifting its focus to broader demand dynamics. There is speculation that the upcoming “Two Sessions” in China will provide more proactive policies aimed at stimulating consumption.?
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Chart of the Day
After a pause in the second half of 2024, China has recommenced gold purchases as it looks to diversify its reserve amid an uncertain geopolitical backdrop.?
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