Oiling the driving force – ShareCafe

By on May 29, 2022 0

Oil continues to be at the forefront of commodity market activity as the Northern Hemisphere heads into summer and peak time for gasoline.

As the U.S. “driving season” (aka summer vacation) begins in earnest this week (after the Memorial Day holiday long weekend), rising gas prices have taken center stage. from the scene last week as stocks fell again.

In New York, Nymex gasoline (petrol) futures rose more than 4% to settle at US$4.108 per gallon.

The number of U.S. oil rigs fell by two to 574 last week, the first drop in 10 weeks, according to data from services firm Baker Hughes. But the number of gas rigs rose by 1 to 151, its highest level since September 2019.

This was after Brent crude rose US$2.03, or 1.7%, to settle at US$119.43, while US West Texas Intermediate (WTI) crude rose 98 cents. , or 0.9%, to settle at US$115.07 a barrel.

For the week, Brent jumped 6% while WTI added more than 5%.

“The US driving season and strong travel demand should help (prices). With supply growth less than demand growth, the oil market is expected to remain undersupplied. As a result, we remain positive in our outlook for crude prices,” UBS analyst Giovanni Staunovo told Reuters.

European Union countries are negotiating a deal on Russian oil sanctions that would embargo on deliveries but delay sanctions on oil delivered by pipeline to reach Hungary and other landlocked member states.

Meanwhile, as Woodside Energy expressed confidence that the price of liquefied natural gas (LNG) would remain high for the rest of 2022, reports emerged on Friday of a drop in Chinese LNG imports in May.

Reuters said a combination of high prices and weak manufacturing due to COVID-19 lockdowns had tightened gas demand while China’s coal-fired power plants maintained high inventory levels, unlike the year. last when electricity rationing began in some parts of the country. .

Reuters reported that gas consumption fell further in May as a resurgence of COVID prompted extended shutdowns at several manufacturing centers, signaling a drop in future demand that has already manifested itself in weak orders for July.

Even for shipments arriving in July, industrial consumers are not placing orders, a Chinese trader told Reuters.

LNG imports are likely to fall by up to 19% this year – from 1 to 15 million tonnes – in what would be the first major drop since China began importing the gas in 2006, according to S&P Global Commodity forecasts. Insights, Wood Mackenzie and SIA Energy.

This, in turn, will put some pressure on Europe and allow unnecessary gas to be diverted there to meet Russian supply shortages.

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Meanwhile, the weakness in the US dollar helped metal prices gain during the week and especially on Friday.

This saw gold prices rise on Friday and into the past week.

The Comex August contract rose US$3.40 to US$1,857.30 an ounce on Friday in New York, a gain of 0.30% on the week.

The gain came despite the risk of loss of confidence with falling US bond yields and an easing dollar.

Yields on US 10-year bonds ended at 2.745%, down nearly 11 basis points on the week.

The Australian dollar ended at 71.60 US cents on Saturday morning, up 1.70% for the week and no sign of market fears over the new Labor government.

Comex silver rose 1.92% to US$22.06 per ounce and Comex copper edged up 0.7% to US$4.32 per pound.

Nickel on the London Metal Exchange rose 4% on Friday to end at $28,284 a tonne for the metal three months ahead, from $27,198 a tonne on Thursday.

Iron ore prices fell slightly last week. Singapore’s futures price for 62% Fe fines delivered to North China closed Friday at $132.8, down from $134.07 the previous Friday.

Australian coking coal futures closed at $433 a tonne in Singapore on Friday.

And ICE Newcastle thermal coal futures stabilized and rose on Friday to end at US$370 a tonne for the June contract. It was down 12% on the week.

U.S. grain prices fell broadly in Chicago on Friday, with traders keeping a close eye on protectionist measures by exporting nations, which tend to ramp up amid supply concerns and inflationary pressures.

Wheat finished around US$11.50 a bushel, corn at US$7.65 a bushel.

Despite growing optimism from Wednesday as investors accepted the Fed regaining control of monetary policy, investors still remain alert to the risks of a global economic slowdown later this year.