WTI crude futures rose above $90 per barrel on Friday, erasing losses from the previous session and heading toward the highest levels in over three weeks, as a tightening supply outlook outweighed fears of a global economic slowdown. Investors fretted about tight oil markets ahead of winter, with OPEC+ implementing large output cuts from this month, while the European Union ban on Russian oil is set to take effect in December. Still, oil prices remain down nearly 30% since June as major central banks tighten further to combat inflation, raising the risk of a global recession. With the Federal Reserve, European Central Bank and Bank of England all delivering a supersized 75 basis point rate hike in their latest policy meetings, analysts warned about the economic risks of rapid rate rises that could take a toll on energy demand. A strong dollar also pressured oil prices, as well as lingering uncertainties surrounding China’s Covid situation.
US natural gas futures fell below $6.1/MMBtu on Thursday, after the EIA report showed a bigger-than-expected storage build. US utilities added 107 bcf of gas to storage during the week ended October 28th, more than market expectations of a 97 bcf build. It compares with an increase of 66 bcf in the same week last year and a five-year (2017-2021) average increase of 45 bcf. Adding to the bearish tone, temperatures are set to remain mild over the next two weeks curbing demand for cooling and allowing utilities to keep injecting gas into storage for the winter. Looking ahead, there is upward pressure on prices thanks to expectations of colder weather in mid-to-late November and a rebound in LNG exports that should boost demand, and as output is falling from record levels. Energy's Cove Point LNG plant in Maryland returned to operations on October 28th after a month-long maintenance and the Freeport LNG plant in Texas is set to at least partially resume production in mid-November.
Gasoline futures extended gains above the $2.6 per gallon mark, their highest since mid-August, amid signs of robust domestic demand and tight supplies. The latest EIA data showed that US gasoline stocks fell by 1.257 million barrels last week, marking the third consecutive weekly drop. Meanwhile, President Joe Biden has threatened to pursue higher taxes on oil company record profits if the industry does not seek to lower costs for Americans and increase production.
Steel rebar futures rose to above CNY 3,500 in the start of November, rebounding from the 2-1/2-year low of CNY 3,464 hit on October 31 after PBoC officials emphasized that China shall keep its property market stable and remain committed to pro-growth strategies. Still, demand for steel and other base metals remains clouded by recession concerns. Key Chinese manufacturing PMIs pointed to contraction for China’s factory activity during October. On top of that, investment in the country’s giant property sector fell more than 8% year-on-year in the first 9 months of 2022, signalling a lower use of steel. Earlier in the month, the World Steel Association revised its forecast of global demand to contract by 2.3% this year, compared to earlier forecasts of a 0.4% rise. In the meantime, bearish pressure was also felt in Chinese markets as the reshuffle of the country’s Politburo signaled President Xi Jinping’s stronger grasp over the country to enact policies that are not market friendly.
Copper futures remained stable at around $3.5 per pound at the start of November as investors weighed signs of low demand against the supply crunch possibility. Manufacturing PMIs for China pointed to yet another contraction in factory activity, as the world’s top consumer struggles to rebound from Covid lockdowns and power shortages. Also, data showed industrial profits declined 2.3% in the first nine months of the year. On the other hand, commodity trader Trafigura warned that global copper stocks have fallen to record lows, with current inventories enough to supply world consumption for just 4.9 days. Freeport-McMoran was also vocal about shortage risks, stating that current low prices do not reflect the tightness in the physical market.