By Daniel Hynes
There was mixed sentiment in markets with focus shifting towards one more rate hike following the release of strong labour market data on Friday. Precious metals came under pressure as prospects of another rate hike increased. Subdued demand and easing supply issues kept other commodity prices under pressure.
Crude oil was steady after rallying nearly 7% last week on OPEC’s announced production cuts from May. Investors are weighing supply tightness against prospects of slowing demand. Market developments remained mixed with Saudi’s Aramco providing full contractual supply of oil for the next month to Asian countries. The Russian Energy Minister is reported to have said that his country reduced oil production by 700kb/d in March. It produced 10.36mb/d in March against 11.1mb/d in February, according to Bloomberg calculations, but this was not apparent in resilient exports and domestic processing. While speculators increased their bullish bets by 63,138 contracts to 176,414, oil’s exchange traded funds saw their biggest outflows since 2019. This suggests the market is still concerned about slowing oil demand.
European gas fell nearly 14% last week as lower prices failed to stimulate demand. The mild winter is keeping gas storage levels at 56%, above the seasonal average of 35%. The market is shrugging off uncertainty around a full restart of LNG terminals in France. North Asian LNG prices were weak as buyer demand remained muted. Japan’s LNG stockpiles with power plants increased by 4.3% to 2.4mt last week, above the five-year average of 1.95mt during April.
Gold prices retreated from record highs following solid US Nonfarm Payroll data, which suggests the Fed will continue its tightening path to cool inflation. Investors have increased their bullish bets in gold with the banking crisis triggering haven buying. Central bank purchases continued with China buying 18t of gold for the fifth straight month in March. This week’s US CPI data followed by the FOMC minutes will be important for the market.
Iron ore prices stabilised after falling 5% last week. Strong seasonal demand is seeing steel inventories drawing down faster, boding well for steel demand. Exports of iron ore from Brazil started recovering, with daily average exports rising to 1.18mt in the first week of April from 0.97mt last year. Base metals ended the week lower due to disappointing industrial activity data, while prices at SHFE stabilised late week. Supply developments were not price supportive either, as Chilean copper exports bounced in March after disruptions earlier in the year. Further, China’s refined copper output rose by 5% m/m and 12% y/y to 951kt in March. This brings total Q1 refined production to 2.71mt, an 8.4% y/y increase. Among battery materials, lithium carbonate prices continued to grind lower to USD31,823/t after falling 6% last week. Cobalt prices fell in tandem with lithium. Refined nickel prices fell as well, while battery grade nickel remained steady.
Data source: Commodities Wrap