Oil markets on edge as supply issues loom
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 metals sectors were supportive.?
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 edged lower last week on the prospect of rising supplies. Traders are monitoring the possible return of several hundred thousand barrels a day of Iraqi crude flowing via Kurdistan. Last week officials said its preparing to restart the pipeline; however, Turkey, home to the port the supplies would eventually be shipped from, said it has yet to hear about a restart. This offset earlier hopes that OPEC would once again delay its planned production hikes. The oil producing group is finding it increasingly difficult to phase out production cuts without disrupting the oil market. The economic backdrop presents significant uncertainties, particularly with the US economy facing potential risks from rapid policy shifts and a global trade war. The US’s stance on Iran could significantly reduce Iranian oil exports. Renewed sanctions on Russia and the halt of US purchases of Venezuelan crude oil will add to the complexity. OPEC member states face rising breakeven levels for their oil pricing, putting pressure on their fiscal budgets. The elevated budgetary needs of several OPEC members mean they will continue to favour maximizing revenue. Given the economic and geopolitical uncertainties and its need to support oil prices, we expect OPEC will delay the production hikes planned for early April.
European natural gas futures fell to a one month low on prospects of easing supply tightness. The ratcheting up of pressure by the US on Ukraine to accept terms of a potential peace deal with Russia is leading to expectations of a resumption of pipeline gas flows from Russia to Europe. Nevertheless, the European Commission is moving ahead with plans to phase out Russian LNG imports. Its developing a roadmap for such a move within the next few weeks, according to an EC spokesperson. North Asia LNG prices were also lower last week amid subdued demand in the spot market. Chinese LNG imports were 143kt/d last week, on a 30-day moving average. This is 13% below the five-year average, according to ship tracking data on Bloomberg.
Gold recorded its eighth weekly advance as geopolitical and trade tensions boost haven demand. The precious metal hit a fresh record high on fears that the US could unwind support for Ukraine. Additional support has come from the USD. The world’s base currency recorded its third straight weekly loss, increasing the metal’s appeal for investors. ETF holdings have swollen to their highest level since January 2024, with more than 16t added last week. That is the biggest weekly influx since 2023, in tonnage terms
Chart of the Day
OPEC member states face rising breakeven levels for their oil, putting pressure on their fiscal budgets. Based on International Monetary Fund (IMF) data, we estimate the fiscal breakeven oil price for Saudi Arabia has risen from USD80.5/bbl in 2020 to over USD98/bbl this year. For OPEC producers the average fiscal breakeven oil price is around USD92/bbl.?
?
5in5 with ANZ Podcast
Director , Asia Agro Produce Pte Ltd
4 天前Very informative