COMMODITIES COOLED OFF AMID RUSSIA-UKRAIN PEACE TALK

WTI crude futures dropped more than 4% to below $103 per barrel on Thursday following reports that the Biden administration is considering a plan to release around 1 million barrels of oil per day for about six months from US reserves. The White House is expected to announce the plan later Thursday, aimed at lowering gasoline prices that have hit record levels following Russia's invasion of Ukraine. The US benchmark erased a 3.4% gain on Wednesday driven by supply concerns as peace talks between Russia and Ukraine appeared to have stalled. The moves also came as US crude stocks fell by 3.4 million barrels last week, way bigger than the 1 million barrel drop forecast. Moreover, major oil producers are unlikely to boost output above their agreed 400,000 barrels per day ahead of an OPEC+ meeting on Thursday.

US natural gas futures rose to almost $5.6 per million British thermal units, closing on the stronger level since November 8th and more than double the price at the same time last year as strong overseas demand is keeping the inventories low and the cost of other energy commodities remains elevated. President Biden struck a new gas deal with the European Union, securing an additional volume of at least 15 bcm of LNG to Europe this year, with a long-term goal of ensuring 50 bcm per year until 2030. Meanwhile, EIA data showed working gas in storage in the lower 48 US states is 17% below the five-year average for this time of year despite production rising to above pre-pandemic highs. The situation is set to improve as the weather turns seasonally milder with the estimates showing average US gas demand, including exports, would drop to 98.4 bcfd next week from 106.0 bcfd this week.

Gasoline futures held to below $3.3 a gallon, down from a 10-year high of $3.9 hit on March 7th in tandem with crude oil as renewed mobility curbs in China due to Covid eased fears over the tight market. Meanwhile, investors continue to monitor efforts to restore the Iran nuclear deal, which could add additional supplies of 1.3 million oil barrels to global markets. Government data showed domestic crude oil stocks unexpectedly shrank last week by 2.5 million barrels, while gasoline inventory levels dropped by 2.9 million barrels, the seventh consecutive week of falls and more than market expectations of a 1.986 million drop.

Heating oil futures recouped losses to trade above $3.8 a gallon, tracking crude oil prices. Meanwhile,OPEC+ nations meet to discuss May’s output hike, with analysts expecting the additional supply to stick to the same 400,000 bpd increase. On the demand front, API data showed domestic distillate stocks, which include heating oil inventories, shrank by 215 thousand barrels last week.

Gold prices rose above $1,920 an ounce after a brief slide to 1-month lows earlier this week, as the dollar and US Treasury yields retreated from recent highs. Analysts suggested that aggressive bets for a faster pace of Federal Reserve tightening may have been scaled back as markets have already priced in bigger rate hikes, while fears of a possible recession added uncertainties to the outlook. On Tuesday, gold prices briefly dipped below $1,900.

Silver futures tumbled to a four-week low of $24.37 per ounce, and it's now down almost 10% from a 9-month high of nearly $27 reached in early March, dragged down by expectations of higher Federal Reserve interest rate hikes and higher Treasury yields. Markets were recalibrating the higher possibility of the Federal Reserve raising interest rates by 50-bps in May following hawkish comments from several policymakers last week.

Copper futures rose toward $4.8 per pound, approaching the record $5 level set in early March, boosted by a weaker dollar. China's financial hub of Shanghai launched a planned two-stage lockdown to contain a coronavirus surge and said that all companies and factories will suspend manufacturing. On the supply side, the world’s largest copper producer Codelco said it would start drilling in the Salar de Maricunga by late March, and that it would last about 10 months. Meanwhile, the rising global production should ease worries about the market deficit. The ICSG said mine production grew by around 2.3% in 2021, driven by higher output from Peru, the world’s second-largest copper-producing country, and Indonesia.