Commodities Market Roundup (London, May 20):
Germany and Qatar have signed an energy partnership declaration, which focuses on hydrogen and liquefied natural gas (LNG) trade, as the biggest economies in Europe seek alternatives to Russia’s invasion of Ukraine. A deal reached on Friday called for regular meetings between authorities from the two countries and creating a working group dedicated to developing LNG and hydrogen trade relations. German companies have implemented several initiatives to lessen their dependency on Russian gas since Russia launched its offensive against Ukraine in late February.
Brent crude climbed to $115.70 per barrel and moved lower to almost equal the US grade. Brent/WTI spreads were inverted during this week, which may be because US demand was so much higher than usual, as exportation economics do not support such a tight relationship. In addition, the US economy hit this week when retail sales expectations for April fell short of expectations on inflationary fears.
This year, oil prices have soared over 40% due to demand recovery from the pandemic and Russia’s aggression against Ukraine. However, while rampant inflation has caused central banks to tighten monetary policy and several Chinese cities, including Shanghai, have been closed due to persistent COVID, confidence in the economic recovery has waned in recent weeks. As a result, China will import 1.1 million barrels of Russian crude oil per day from seaborne sources in May, up from 750,000 barrels in the first quarter and 800,000 in 2021.
Even with a rebounding stockpile, prices fell in Europe, helping ease supply concerns even after the Russian weekend cutoff to Finland. Dutch benchmark futures fell by 3.8% on Friday. The contract will fall by more than 9% this week, the most significant drop since March.
In the early US dealings on Friday morning, gold and silver prices were unchanged from the previous day. According to bulls, safe-haven demand supports precious metals, while bears counter that rising bond yields and a stronger US dollar remain bearish factors. Fundamental news is needed by both bulls and bears to drive prices higher. The June gold futures contract was last up $0.40 at $1,841.80. At last check, July Comex silver futures were down $0.098 at $21.80 an ounce.
Gold and silver prices rose sharply on Friday, May 20, 2022, and gold and silver prices rose sharply in crucial spot markets. After rising as much as 1.9 percent the previous session, spot gold was up 0.2 percent by the time of writing. Gold futures in the US were almost flat at $1,840.80. Gold futures for June delivery were trading at $253.37 per 10 grams on the Multi Commodity Exchange of India (MCX), up by $2.0 (0.31 percent).
Food prices are rising both in the United States and abroad, which has caused countries to restrict exports of certain agricultural commodities. In addition, domestic food prices have risen, and agronomists wonder what other crops may be affected. In April, the US Department of Labor reported that consumer food prices had increased 9.4 percent y/y, marking the most significant 12-month increase since 1981.
Argentinean corn shipments are currently taxed at 12%. After years of debt crises, the country is sorely in need of replenishing its depleted reserves. Its main export and top source of foreign currency is grain. The government raised export taxes on soya beans from 31% to 33% in March to contain local flour prices. Congress would need to approve a tariff hike on corn and wheat.