The Commodities Feed: Macro headwinds


Energy – Russian oil price cap talks

Despite a raft of central banks hiking rates yesterday in a bid to rein in inflation, the oil market held up well. ICE Brent managed to settle 0.7% higher on the day. However, with expectations of only further monetary tightening in the months ahead, commodity markets are likely to face some strong headwinds. The dominance of the USD at the moment will only add to these headwinds.

According to reports the EU is trying to push ahead with the G-7 price cap on Russian oil, after Putin’s latest escalation in the war. Member states will apparently be meeting over the weekend to discuss the cap, along with a number of other new potential sanctions. There are suggestions that the aim is to come to a preliminary agreement by early October, ahead of an EU leaders’ meeting. Getting all members to agree on a price cap could prove difficult, just like we saw with the EU ban on Russian oil, which was watered down to include only seaborne trade, given objections from Hungary. EU members will want to come to a final decision by 5 December, which is when the ban on Russian seaborne crude into the EU comes into force.

Latest data from International Enterprise Singapore shows that oil product stocks in Singapore increased by 3.64MMbbls over the week to 47.15MMbbls. The increase was driven fully by residues, with them increasing by 3.98MMbbls over the week to 23.4MMbbls. Light and middle distillates both saw small declines over the course of the week. As for Europe, refined product stocks in the ARA region increased by 15kt to 5.34mt. Fuel oil and gasoline stocks fell by 40kt and 20kt respectively, whilst gasoil inventories increased by 30kt over the week. However, like most regions, gasoil stocks are still very tight for this stage of the year and are at their lowest levels since at least 2007 for this time of year.

US natural gas prices came under pressure yesterday, falling almost 9%. This weakness came after the EIA reported that US natural gas storage increased by more than expected over the week. The latest data shows that storage increased by 103bcf last week, whilst the market was expecting a number closer to around 95bcf. The build was also significantly larger than the 5-year average of 81 bcf.



Read The Original Article