Trump's tariffs weigh on sentiment
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
A stronger USD weighed on investor appetite across commodity markets. Easing geopolitical tensions also pushed energy markets lower.
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 rose in early trade amid reports of further delays to OPEC’s planned production hikes. Key nations in the OPEC+ alliance have begun discussions to delay the phase-out of voluntary production cuts planned for January, potentially for several months, according to a Bloomberg report. Delegates are said to be concerned about going ahead with the 180kb/d increase, given signs of a global oversupply in the oil market. Saudi Arabia’s Energy Minister, Price Abdulaziz bin Salman, met with Russia’s Deputy Prime Minister, Alexander Novak, and Iraq’s Prime Minister, Mohammed Shia Al-Sudani, in Baghdad, where they discussed oil market stability. OPEC+ is due to meet online on 1 December. However, crude oil gave up gains amid reports that US President, Joe Biden, will announce that Israel and Hezbollah have reached an agreement to cease fighting. If so, it reduces the risk of disruptions to flows from the Middle East.
European gas fell, as fears of tighter supply eased. Concerns over an imminent halt to Russia gas supplies eased after a capacity auction in Austria suggested pipeline flows from Russia will continue in December. In addition, capacity offered for next month at the Baumgarten cross-border point between Slovakia and Austria was almost fully booked at an auction. This follows warnings last week from Gazprom that it would reduce gas supplies after Austrian utility company, OMV, stopped payment due to an arbitration dispute. However, these auctions don’t completely remove the uncertainty surrounding Russian gas. US sanctions on Gazprombank make it difficult for it to handle gas payments from European users. Also, next month a gas transit deal between Russia and Ukraine expires. North Asian LNG edged lower after an update from Woodside suggested there is no production equipment at risk following the shutdown of its Pluto LNG plant.
Base metals headed lower after Trump said he plans to impose a 25% tariff on all goods from Canada and Mexico. These raised concerns of a global trade war weighing on economic growth. Mexican President, Claudia Sheinbaum, suggested her country would respond to Trump’s tariffs with levies of its own, warning the economic consequences would be dire. However, it could support prices for commodities such as aluminium and steel. The US gets about 70% of its aluminium from abroad, with 60% of that from Canada. Steel imports account for 24% of US supply, with Canada providing about a quarter and Mexico approximately 15%. Zinc bucked the trend to rise more than 2%, after orders to withdraw inventory from LME warehouses jumped by the most in nine years. Nervousness about supply has grown in recent weeks, as data show a single entity has brought up more than half of the readily available stock in the LME warehouse system.
Gold prices were under pressure early in the session, as Trump’s threat of tariffs saw the USD rise. However, the precious metal steadied to end the session relatively unchanged, as traders contemplate the president-elect’s pick of Scott Bessent for Treasury Secretary. He is seen as a measured choice that would inject more stability into financial markets.?
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Chart of the Day
Chinese carbon prices hit a record high in November as the emissions market continued to gather momentum from emerging demand ahead of the year-end compliance deadline. This has been triggered by the expansion of sectors covered by the carbon emissions allowance scheme, as well as tighter rules in relation to allowance allocation.
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