A risk-off tone across markets helped push the industrial metals sector higher. However, easing supply concerns weighed on the energy sector..
By Daniel Hynes
Crude oil gained as the prospect of more Venezuela oil did little to ease concerns of disruptions in the Middle East. The US suspended sanctions on Venezuelan oil, gas and gold production after four years. The move comes after the Maduro government signed an agreement with opposition parties to restore political rights and allow them to participate in next year’s presidential elections. Exports to the US are expected to swell from roughly 116kb/d. Prior to the sanctions, the US received more than 0.5mb/d from Venezuela. However, due to operational constraints, the upside to exports is likely to be around 200kb/d. Tensions in the Middle East remain high, despite a mid-week visit to Israel by US President Joe Biden. Iran continues to call for a full oil embargo on the country. However, Israel’s main suppliers, including Kazakhstan and Azerbaijan were unlikely to heed such a call. Gains in crude oil were also bolstered by a broad risk-on tone across markets following dovish commentary from Fed Chair Jerome Powell.
European gas prices edged lower as rising LNG imports eased concerns of supply disruptions in the Middle East. Flows of liquefied natural gas from import terminals in northwest Europe rose to the highest levels since June this week, according to Bloomberg data. This comes as weather forecasts point to mild and windy weather for much of the continent over the next week or two. German wind output is expected to peak later this week, leading to strong renewable energy output. Nevertheless, supply risks remain high. Diplomatic efforts in the Middle East are ongoing. Traders are also watching the transit of Russian gas through Bulgaria. These flows could be under threat after Bulgaria imposed a surprise tax on fuel, which could effectively halt supply for countries such as Serbia and Hungary. Lower European prices also helped drag down North Asian LNG prices. This was compounded by importers such as China and Japan pulling back from the spot market, citing high prices.
Copper edged higher as the risk-on tone across market boosted sentiment. A weaker USD and lower yields late in the session helped support the move. However, the recent weakness in prices is raising concerns in the mining industry. Freeport-McMoRan warned that prices are too low to justify major investments in new projects. President Kathleen Quirk said they don’t want to commit to major multibillion-dollar projects in the current environment. The price for the red metal has fallen more than 14% since its January peak. This is despite the strong outlook for the metal amid the surge in investment in clean energy technology sectors.
Iron ore futures gained despite further signs of weakness in China’s property sector. Home prices in major Chinese cities fell at a faster pace in September, signaling ongoing weak demand.
Data source: Commodities Wrap