Top commodities to trade – Oil prices were steady on Monday as the market waited for more clues on where US interest rates may be headed, after several Fed officials weighed in with more cautious comments, even as inflation appears to be cooling down.
Top commodities to trade: Oil trading opportunities
Brent futures were down 2 cents at $83.96 a barrel by 11:10 a.m. EDT (1510 GMT), and U.S. West Texas Intermediate (WTI) crude rose 5 cents, or 0.1%, to $80.11.
Fed vice-chair for supervision Michael Barr said US inflation data through the first months of 2024 has been weak: which leaves the US central bank “well short of the evidence needed” to ease policy.
Top commodities to trade: Trade oil
Atlanta Fed President Raphael Bostic said it “will be a long time from now before the US central bank has the confidence that… inflation is going to come back to target”.
Several other Fed speakers are due to speak on Monday, with more planned for later in the week.
Markets are also waiting for the minutes of that last meeting, due on Wednesday.
Borrowing costs in the US have stayed high since July last year to help contain persistent inflation. The timing of rate cuts is key to how economic growth and oil demand will pick up.
Top commodities to trade: World’s largest oil producers
Prices barely budged, despite political turmoil in two of the world’s largest oil-producing countries.
Iran’s president died in a helicopter crash, and OPEC kingpin Saudi Arabia’s crown prince postponed a trip to Japan this week while his father was hospitalised.
Top commodities to trade: Eurasia group
Another change in a leadership environment like Iran’s – like the sudden death of a president – is unlikely to alter Iranian oil policy, said Greg Priddy, a senior energy analyst with the Eurasia Group, a political risk consultant.
Ayatollah Ali Khamenei, Iran’s supreme leader, retains ultimate power over all state affairs.
Top commodities to trade: Saudi Arabia shakes up oil policy
Change at the top of the Saudi royal family is also unlikely to shake up the kingdom’s oil policy, says Saul Kavonic, an energy analyst at MST Marquee.
He points out that Crown Prince Mohammed Bin Salman, Saudi Arabia’s de facto lead on energy, is ‘playing the same tune’ that previous Saudi leaders have.
‘We continue to believe they will stick with the plan and there is very much continuity in Saudi strategy,’ Kavonic said.
Top commodities to trade: OPEC+ countries
OPEC+, which includes the cartel and a group of allied oil-producing countries, is due to meet again on 1 June.
Top commodities to trade: Soaring exports
Soaring Saudi crude exports in March set a new nine-month high Meanwhile, Russia remained China’s biggest oil supplier for the 12th month in April, as volumes rose 30% from a year earlier as refiners continued to cash in on rock-bottom shipments from Russia, while supplies from Saudi Arabia fell by a quarter as it had hiked prices.
The Slavyansk oil refinery in the Krasnodar region of Russia was hit by a drone attack over the weekend.
Top commodities to trade: Crude markets
Global physical crude markets on Wednesday were bracing for more weakness, traders and analysts told Reuters, as soft refinery demand and abundant supply could lead to further weakness in benchmark crude futures.
High interest rates and inflation are killing consumer and industrial demand at a time when supply is rising from sources outside OPEC such as the US, which could stiffen the resolve of OPEC+ producers to keep curbs in place at their 1 June meeting.
Demand from refiners is weak even after the end of spring maintenance season, which boosted their capacity to process crude, Saxo Bank analyst Ole Hansen said.
“Rising refinery capacity has not been met by an anticipated rise in demand, which is now falling victim to the twin pressures of hikes in interest rates and inflation.
Add trade wars and a challenging geopolitical picture, and it is easy to see why oil markets have taken a hit,” he said.
That weakness is especially visible in the North Sea, where crude grades that, along with US WTI Midland crude, underpin the Brent futures benchmark and price two-thirds of world oil.
Top commodities to trade: Forties crude benckmark
Forties crude, the North Sea benchmark traded into Northwest Europe, on 14 May fell to a discount of 97 cents to dated Brent, its biggest since January this year, according to data from S&P Global Commodity Insights, formerly Platts.
Platts on 13 May assessed WTI Midland cargoes pricing into Northwest Europe at dated Brent minus 69 cents, the lowest assessment since WTI joined the North Sea crudes that underpin the Brent benchmark last May.
‘It is a fairly placid time for demand,’ said Neil Crosby of the broker Sparta Commodities who noted that ample crude stocks could be keeping buyers on hold.
‘It is looking rather bearish for physical pricing for now.
Top commodities to trade: Physical oil markets
The physical markets in the US have also gone soft: while refinery processing rates in the US have stayed well below normal seasonal levels through mid-May even after the end of the maintenance season, the LSEG data showed that prices for Louisiana Light Sweet crude fell to a three-week low of $2.33 per barrel over WTI on 16 May.
The four-week average for US refinery utilisation was 88.7%for the week ending on 10 May, down from 91.2% over the same period last year, according to data from the US Energy Information Administration.
At the same time, the four-week averages for both US gasoline, and distillate product supplied, a proxy for demand, were all 4-5% below 2023 levels.
The global refinery profit margins have also weakened partly due to the global slump in values of diesel, one of the key refined products used in both the industrial and the transport sectors.
Tamás Varga, analyst at PVM in London, said that the lower margins were a clear signal that refiners were producing too much fuel, and underscoring weak consumer and industrial demand.
Falling profits have already prompted several Asian refiners to process less crude oil in May, with other refiners considering a round of further cuts in the next few months. That reduction in crude demand reflects just how weak the oil market is at the moment, according to John Kilduff of Again Capital, an energy hedge fund.
‘This is really the last leg of the refining balance, and it’s Asia. It’s the first thing that gets shuttered when markets overbuild,’ he said. ‘I don’t think [OPEC] turns off the spigot this time. I think they roll over voluntary cuts in June.’
Top commodities to trade: African oil trade
Flares are seen flaring from a gully in the oil-rich province of Abia, Nigeria, on April 21, 2015. Refining demand has weakened, causing prices for Middle East crude to slip, with benchmark Dubai slumping to a near two-month low of $81.24 a barrel on 8 May, leaving an overhang of Nigerian supply that has forced sellers to cut prices for May cargoes.
Nigerian Qua Iboe crude fell to $2.10 above dated Brent on 15 May, the lowest premium since February, according to LSEG data.
Weak demand is keeping markets subdued, with one Asian crude buyer saying he was waiting for values to fall further before making purchases of West African crude and WTI. “They need to find outlets. There is too much oil,” said the buyer, who declined to be identified.
Top commodities to trade: Gold rises
Spot gold rose 0.4% to $2,424.30 per ounce by 1529 GMT after hitting a record high of $2,449.89 earlier in the session. US gold futures climbed 0.5% to $2,428.50.
“Inflation’s sticking around, we’ll get some kinks in the inflation data, maybe things trend downward, but the debt is also mounting in the US, there’s a reason to diversify away from that, too,” said Daniel Pavilonis, senior market strategist at RJO Futures.
Top commodities to trade: US consumer prices
The US consumer prices data last week showed that inflation decelerated a bit more than expected in the month of April, lending further credence to the theory that the pace of the downward rush in prices has resumed.
Cue up expectations of an interest rate cut from the US Federal Reserve in September.
The lower rates, the lower the opportunity cost of holding non-yielding bullion.
And uncertainty is always bullish for gold. If the market is bubbling with fear now, RJO’s Pavilonis says it’s bubbling with the fear of missing out on gold’s rally.
‘There’s a lot of non-traders that are calling up brokers to buy futures or to take physical delivery.’
Boosting gold’s bullish case were rising risk aversion as a helicopter crash killed Iranian president Ebrahim Raisi, said analysts at Kitco Metals in a note.
Others also cited gold’s surge to China’s announcement of “historic” property sector steps to show strength in the world’s biggest consumer of gold and other industrial metals.
Top commodities to trade: Silver & platinum
Spot silver climbed 1.4% to $31.94, after touching an over 11-year high.
Platinum fell 2.2% to $1,056.97 after touching its peak in May 2023. Palladium rose 0.7% to $1,015.16.
“Platinum is trading at a premium over palladium with rising inflows of exchange-traded funds,” ANZ said in a note.
Four lithium miners have come forward to table plans to produce battery-grade lithium in Zimbabwe, a senior government official said on Monday, as the southern African nation pushes miners of the mineral used in electric vehicle batteries and to store renewable energy to refine more locally.
Zimbabwe is Africa’s top lithium producer and wants to boost the sector to help revive its economy as China – the world’s top lithium consumer – goes all-in on electric vehicles.
Chinese lithium miners, who dominate the Zimbabwe sector, produce concentrates that are shipped to China for further processing. In November last year, Zimbabwe’s finance minister Mthuli Ncube said miners had until March 2024 to submit plans on whether they would refine within the country.
Some asked for an extension and the government granted them two more months, deputy mines minister Polite Kambamura told Reuters.
‘They are coming in with plans but they are long‑term plans that we are getting. We have four mega-producers that have come forward,’ Kambamura said, without naming the firms that have submitted their plans; he also said the government hasn’t even considered the proposals, yet.
Zimbabwe’s hard-rock lithium resources, some of the largest in the world, have attracted more than $1 billion of investment from Chinese miners such as Zhejiang Huayou Cobalt (603799.SS), Sinomine Resource Group (002738.SZ) and Chengxin Lithium Group, Yahua Group (002497.SZ), Canmax Technologies (300390.SZ) and the Tsingshan Group.
Huayou has stated that it will wait for ‘construction and economic conditions to be right’ before it begins producing battery-grade lithium at its Zimbabwe site.
The company reports that Zimbabwe has no lithium processing facilities or ancillary inputs, such as reliable renewable energy, natural gas or sulfuric acid.
But Zimbabwe has claimed local refining anyway, to take advantage of the boom that the country’s lithium is likely to enjoy as the world switches to clean energy, adding metres to the battery’s colossal global market.
‘We are not going to end on concentrates, we want batteries to be manufactured here,’ Kambamura said.
At forex news today, Brazil’s President Luiz Inacio Lula da Silva could find that replacing the chief executive officer of Petrobras (PETR4.SA) won’t turn the state-run oil company into the creation-and-development engine it was during his first two terms in 2002-2010.
Last week, Lula directed the incoming CEO, Magda Chambriard, to step up investments in shipyards, fertiliser plants, refineries and natural gas lines to improve the economy going forward, according to people familiar with talks between the two.
And in her first public statement since her appointment as CEO, Chambriard wrote on LinkedIn on Monday: ‘My aim is to ensure the continued growth of our industry.’
By November, Lula had delivered the CEO job to her.
