Renewed supply disruptions push global gas prices higher
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
Concerns over demand in China continue to hang over metal markets. However, renewed supply side issues in energy markets supported prices.
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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Ahead Today
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Market Commentary
Crude oil snapped a three-day rally to end Friday’s session lower. That was triggered by easing geopolitical risks. A CNN article reported that Hezbollah is considering a US-Israel ceasefire proposal. Authorities are optimistic that Hezbollah will agree to terms and respond early this week. In addition, reports emerged that Ukraine is calling for action to force Russia toward peace, amid talks between Germany and Russia. Fresh data from China also weighed on sentiment. Apparent oil consumption fell 5.4% to 14.07mb/d in October, according to Bloomberg data. This leaves growth for the year down 4.03% to 14mb/d. Prices gained earlier in the week following signs of strong demand in the US. Gasoline inventory in the US fell 4,407kbbl last week, according to EIA data.
European gas rallied amid fears of supply disruptions. Austrian utility OMV said that Russia will cut off fuel deliveries from Saturday. This comes after the company warned earlier in the week it will stop paying for imports from Gazprom to recoup damages it won in arbitration. Despite Russia restricting gas flows into Europe after it launched an attack on Ukraine, a handful of countries have continued buying gas piped through the Ukraine under a transit deal that is set to expire at the end of the year. This earlier-than-expected cut to Russian gas comes as solder temperatures and poor renewable energy output have resulted in stockpiles being drawn down faster than normal. Gains in Europe helped push North Asian LNG higher. Rising competition with Europe has spurred some buyers to actively seek LNG in the spot market.
Copper prices fell sharply last week, weighed down by concerns over global demand. Uncertainty over what Donald Trump’s return to the White House will mean for the global economy has weighed on sentiment. This wasn’t helped by disappointment over China’s much anticipated stimulus package. The world’s biggest metals importer unveiled a USD1.4bn program to restructure local government debt. However, it stopped short of delivering new stimulus. A stronger USD also weighed on investor appetite. However, base metals ended the week on a brighter note, after data showed a more balanced economy as consumption growth nearly caught up to factory output. Retail sales grew at the fastest pace in eight months in October. Aluminium bucked the trend to end the week higher after China said it would cancel a tax rebate on aluminium products. China is a major exporter, with volumes of semi-finished aluminium reaching 5.2mt in 2023, equivalent to 7% of the global aluminium market.
Iron ore dipped below USD100/t last week amid signs of stronger supply. Shipments from Australia’s leading terminal, Port Hedland, totalled 45.6mt in October. This brings this year’s total to 472.3mt, the highest level for that period in four years. This is leading to rising stockpiles held at Chinese ports. However, prices could find some support as steel output rebounds. Production in October hit 81.88mt, up 6.2% on September and 2.9% higher than last year. This has been driven by demand from non-property sectors. Fixed asset investment growth rose to 3.3% in September.?
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Chart of the Day
China's steel output rose in October, going against the normal seasonal trend. This suggests recent stimulus measures are providing some support.
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