The London copper market remains in a historic squeeze, as a critical shortfall in available inventories drives prices to near-record levels. Spot metal surged to more than $1,100 a ton above benchmark three-month prices, the widest spread on record, according to London Metal Exchange data. The pattern known as backwardation reemerged this summer. The blowout in spreads has drawn the attention of the exchange – the LME said Monday it was monitoring the situation closely and has options to ensure an orderly market is maintained.
Jet fuel is back in a big way. The oil product that suffered the most from the traumatic collapse in demand driven by the coronavirus pandemic has soared in recent months as underlying crude prices rally; airlines boost services as barriers to air travel in Asia start to fall away; and a gas-driven energy crunch spurs regional refiners to prioritize the production of diesel over jet fuel. That heady mix of bullish factors has propelled jet-kerosene prices in Singapore – a proxy for jet fuel across wider region – surging back toward $100 a barrel.
While jet fuel has been staging a comeback globally as long-haul flights start to resume, a key metric shows the recovery in Asia still has a long way to go. The regrade swap, which measures the premium of jet fuel prices over diesel in the region, fell to the lowest since September 2020 this week. That’s due to a strong rebound in diesel prices, and also because Asia has lagged behind other regions in the resumption of international air travel.
Physical oil barrels priced off Brent are surging further after the world’s most-important crude benchmark pushed higher toward $100 a barrel as the tension over Ukraine intensified. Dated to Front Line swaps – typically used to hedge, or speculate on the difference between physical crude prices and futures – touched a fresh record of $2.37 a barrel on Monday, according to Bloomberg Fair Value data. That’s a warning sign that buyers are having increasing difficulty securing actual barrels, Goldman Sachs Group Inc. said in a note.
U.S. refiners are making the biggest profit ever from churning oil into fuel. The 3-2-1 futures crack spread surged above $45 on Wednesday, the highest level in records going back to 1986. That exceeded the one-day blip in April 2020 when West Texas Intermediate futures briefly dipped below zero. Gulf Coast refiners have been running at above 94% since returning from maintenance, the highest rate for this time of year in records going back more than a decade, but still can’t keep inventories from falling amid strong demand.
Oil traders are eagerly watching far out prices for signs of higher supply – there is little indication of that yet. West Texas Intermediate for five years ahead is trading at its strongest since 2015 and has been rallying as the market searches for a price that incentivizes more barrels onto the market to meet long-term demand, according to David Martin, head of commodities desk strategy at BNP Paribas. The gains could continue if U.S. shale producers aren’t willing or able to balance the market in the medium-term, he said.
U.S. ethanol output surged to the highest since Dec. 2017 amid robust gasoline demand and strong producer margins. Spot prices for the corn-based biofuel are on a tear, rising 5.7% Wednesday to the highest price in more than seven years. While energy policy out of Washington remains a big question, high biofuel prices and relatively cheap grain may keep ethanol production strong for the foreseeable future.
America’s oil stockpiles continue to shrink, stoking higher prices as the government works to address inflation concerns. Crude production is still 900,000 barrels a day lower than it was before Hurricane Ida crippled Gulf of Mexico output last month. At the same time, more supply from the OPEC+ producer group may not meet global demand if there’s significant substitution of oil products for natural gas to help Europe’s power generation this winter.
Crude inventories at Cushing, Oklahoma, the delivery point for benchmark U.S. oil futures, drained to the lowest in three years last week as higher export demand helped pull barrels to the Gulf Coast, data from the Energy Information Administration showed on Wednesday. A global energy crisis is incentivizing more fuel output and buyers in Asia and Europe are seeking alternatives to pricier international oil grades. Stockpiles at the hub are approaching 30 million barrels, a key psychological level and a drop below could send oil prices surging even more, according to traders.
American crude output last week reached 11.8 million barrels a day, the highest since May 2020, an Energy Information Administration report released Wednesday showed. Though shale explorers have been cautious in boosting production this year even after oil prices climbed, drilling activity has been on a steady, gradual rise since the fall of last year. But output is still well below the record 13.1 million barrels a day reached in March 2020, before the pandemic sent production plunging.
Russian oil sales are increasingly under an embargo in all but name, threatening a vital source of global crude supply. While there are currently no sanctions in place preventing companies from purchasing the nation’s crude, buyers are refusing to take it, and tanker companies are unwilling to ship it. Refineries are racing to secure alternative supplies from other markets, pushing some gauges in the futures market to the strongest in years, and headline Brent prices above $110 a barrel.
Wholesale gasoline prices in New York are trading just shy of a record reached on Friday, less than three weeks before the start of the summer driving season. Wholesale-price gains tend to lead to increases at the retail pump, which, at $4.328 a gallon, is only a whisker below the record of $4.331 reached on March 10, according to auto club AAA. Gasoline stockpiles in the New York Harbor region have tumbled to their lowest level in 11 years for this time of year despite higher imports from Europe.
俄罗斯2月份主要品级原油的出口量将降至五个月低点，凸显出在需求复苏前景向好之际，俄罗斯的石油供应挑战。作为全球第二大石油出口国，下个月俄罗斯将每天从该国的波罗的海港口出口131万桶乌拉尔原油，为去年9月以来的最低水平。其中大部分最终运往欧洲西北部地区的炼油厂。目前还不清楚俄罗斯出口下滑对该国石油产量意味着什么，按照OPEC+的增产计划，俄罗斯本应提高石油产量。但该国国内的炼油厂似乎开足马力，可能会接纳原本用于出口的原油，俄罗斯今年看起来还可能通过德鲁日巴输油管直接向欧洲输送更多原油。
U.S. demand for distillates, which includes heating oil and diesel, hit a three-year high in late January as consumption rose from power producers and truckers alike. Cold weather drove fuel-fired power generation to the highest level since 2018. Heating demand added to robust highway trucking, which rose by almost 16% year-over-year during the last week of January, according to data from the Department of Transportation.
The energy crunch that’s roiling markets and underpinning greater demand for fuels has pushed oil-refining margins back to levels last seen before the pandemic. Returns for world-class processors in Singapore are at the highest since October 2019, while profits from making diesel hovered near a 21-month high. Saudi Aramco said the natural gas crisis was boosting consumption, while Goldman Sachs predicted even higher oil demand later this year. Low Chinese exports and a steady flow of fuel from Asia to regions such as Europe are also aiding fundamentals, said Energy Aspects analyst Sandra Octavia.
Europe will begin winter with “very tight” natural-gas inventories, according to Vitol SA. The company, one of the world’s biggest fuel traders, said warmer weather was key to easing gas prices, which have surged in Europe and Asia to the equivalent of around $155 per barrel of oil. “Markets are frantic and panicky,” Russell Hardy, Vitol’s chief executive officer, said Tuesday.
The picture is getting bleaker for US drivers as the summer driving season ramps up. Average retail prices for gasoline and diesel both jumped to fresh records, according to the latest data from auto club AAA. Regular gasoline – at $4.919 a gallon – is 61% more expensive than a year ago, while diesel – at $5.684 a gallon – is 78% more costly. “People are still fueling up, despite these high prices,” said Andrew Gross, a AAA spokesperson. “At some point, drivers may change their daily driving habits or lifestyle due to these high prices, but we are not there yet.”
Hedge funds betting on rising U.S. gasoline prices boosted net-bullish positions to a nine-month high, according to the latest Commodity Futures Trading Commission data. Net-long wagers on Nymex futures were the most since January, with soaring gasoline demand running headlong into the lowest inventories of the fuel since 2017. Nationwide pump prices for unleaded averaged $3.401 per gallon Friday, the highest since September 2014, according to AAA.
Copper stockpiles monitored by the Shanghai exchange have surged again as traders wait for demand to recover after the Lunar New Year holiday. China’s industrial sector appears to be entering a fresh downturn, according to Bloomberg Economics, although a shift in Beijing’s regulatory stance on energy policies could cushion the slowdown this year.
European mining stocks are on a tear again in 2022, with the Stoxx 600 Basic Resources Index outperforming all the other sectors to trade near its highest level since 2008. Yet the relative performance of the sub-group is still not completely reflecting the surge in industrial metals prices over the past year. The sector trades at low multiples, and the market is overly pessimistic on its 2022 earnings, according to Deutsche Bank AG analysts, who see high cash returns and a tight supply-demand balance for metals.
Nickel is facing its biggest squeeze in more than a decade, with buyers paying huge premiums for near-term supplies as stockpiles slide. Cash contracts are now the most expensive since 2010 compared with those expiring a day later on the London Metal Exchange. Rising demand for the metal used in electric-vehicle batteries and concerns about exports from Indonesia are also helping keep prices near the highest since 2011.
Limited global supply and surging costs are pushing a rare premium for nearby March cotton deliveries over May to repeated highs, signaling consumers urgency to get the fiber and that costs will stay higher for apparel companies. World shipping headwinds and elevated freight rates compounded projections for a second straight global deficit in 2021-22. That drove prices for the fiber used in jeans, T-shirts and diapers up 44% last year, the most since 2010.
Cotton futures climbed back to 10-year highs after the U.S. Department of Agriculture cut the domestic crop more than expected amid lower yields in Texas, the top growing state. The fiber surged 44% in the past year on projections for two consecutive global supply deficits that were compounded by surging freight rates and shipping bottlenecks that are keeping supplies from reaching buyers. The result is higher apparel costs for clothing including jeans and T-shirts.
Palladium is signaling tight nearby availability due to sanctions on Russia, which accounts for 40% of all mined production. The backwardation in spot palladium has deepened to the most since April 2020, according to Bloomberg data. Concerns over possible supply shortages of the metal used in cars to reduce emissions are evident across the commodities markets, with prices of wheat, natural gas and aluminum surging after traders backed away from Russia.
Benchmark thermal coal in Asia surged 46% to the highest in data back to 2008 as consumers seek alternatives to shipments from Russia, a major exporter. Futures for high-quality thermal coal loaded on ships at Newcastle port in Australia rose to $446 a ton Wednesday on ICE Futures Europe. That boosted producers in early Thursday trading in Sydney, with Whitehaven Coal Ltd.soaring to the highest since 2019.
A global economic recovery is boosting demand for lead, and has created a rare trading window for Chinese exporters. Prices in London relative to those in Shanghai are near the highest since 2013, meaning it’s profitable to ship the metal out of the Asian nation. Chinese customs data showed outbound shipments spiked to a record in September, with expectations building that volumes will expand further and pressure international lead prices.
Demand for propane in the U.S. jumped to a record last week, according to the Energy Information Administration. The spike came ahead of a winter blast through the Midwest and Northeast, where many rural households rely on the fuel for heating. Demand has also increased steadily over the last several years with the addition of propane dehydrogenation plants on the U.S. Gulf Coast, which turn propane into propylene, a building block for plastic.
European electricity prices jumped after the region’s biggest producer cut its nuclear output target for a second time in a month, the latest sign that this winter’s energy crisis is far from over. Electricite de France SA said its nuclear production could fall this year to levels not seen since 1990, and Morgan Stanley says there’s a “meaningful likelihood” of a production cut for 2023.
The Nordic power market, historically an exporter to the continent, may be heading for a supply crunch of its own. The hydro balance, the amount of water available to generate electricity compared with the long-term average, is at its lowest in three years just as demand is poised to rise with the start of the heating season. The daily Nordic benchmark power price rose to its highest in 11 years on Friday.