COMMODITY MARKETS SOARS
WTI crude futures stabilized above $100 per barrel on Wednesday following days of heightened volatility, as the threat of additional sanctions on Russia countered fears of weaker demand following a build in US crude stockpiles and an extended lockdown in Shanghai. The US and its allies prepared new sanctions on Moscow over civilian killings in northern Ukraine, with the EU proposing to ban Russian coal and to prevent Russian ships from entering EU ports. Britain also urged G7 and NATO countries to agree to a timetable to phase out oil and gas imports from Russia. Meanwhile, US crude inventories rose by 1.1 million barrels last week, defying market expectations for a 2.1 million barrel decline. Demand concerns in China also resurfaced after authorities extended a lockdown in Shanghai on Tuesday to cover all of the financial center’s 26 million residents.
US natural gas futures rallied more than 7% to $6.1 per million British thermal units, a level not seen since October 28th, on expectations of stronger demand and lower supply. Updated pipeline flow data showed the steepest one-day drop in output since the February freeze-off. Demand projections for the 15-day outlook period remained unchanged day/day, with warmer trends for the next 2 weekends and cooler temperatures during April 16-19th.
Gasoline futures firmed above $3.2 a gallon. Meanwhile, the Japanese industry minister Koichi Hagiuda said that the IEA is still examining details of a planned second round of coordinated release of oil reserves. Elsewhere, talks to revive the Iranian nuclear deal seemed to have stalled recently, further delaying the return of 1.3 million barrels of oil to global markets.
Heating oil futures were around $3.5 a gallon, almost 19% below a record high of $4.3 hit on March 9th, in tandem with lower oil prices, as the Biden administration announced a record release of up to 180 million barrels, or 1 million barrels a day, for about six months from its strategic reserves. Also, US distillate stockpiles which include diesel and heating oil rose by 1.394 million barrels in the week ended March 25th, compared to market expectations of a 1.55-million-barrel drop, data from the EIA Petroleum Status Report showed. Meanwhile, OPEC+ stuck to plans to add a modest 432,000 barrels a day of supply in May, despite western pressure on Saudi Arabia and the UAE to use their spare capacity to boost output further.
Newcastle coal futures bottomed below $300 per tonne, a level not seen in a month, as demand in China is easing and prices of other energy commodities moderate. The latest coronavirus-induced restrictions in China, particularly in Shanghai and Tangshan, hurt demand and led to increased inventories at mines. Still, coal prices have almost doubled since the beginning of 2022.
Steel Rebar futures have climbed to around CNY 5,110 per tonne, a level not seen since October last year, as risks of supply shortages after top steelmaking city Tangshan implemented a lockdown lent optimism to steel bulls. Soaring energy costs on the heels of the conflict have forced steelmakers to increase prices for large steel sections. However, these COVID-19 lockdowns will also dent demand while increasing inventories, limiting some of the upside momenta. Still, Chinese steel demand is set to rebound strongly as the country is expected to unleash more fiscal spending and tax cuts to spur investment and consumption.
Prices for iron ore cargoes with a 63.5% iron content for delivery into Tianjin climbed to above $150 per tonne, a mark not seen in three weeks and closing in on its highest level since August 2021.With most producers cutting production amid material shortages. Supporting prices further were expectations of additional stimulus to shore up the world’s second-largest economy and signs of a resilient Chinese industrial sector.
