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Commodity Tracker: 4 charts to watch this week

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This week’s Commodity Tracker kicks off with a look at easing stocks of refined oil products at the Middle East’s biggest storage hub of Fujairah, as well as the prospects for gas supply in Europe over winter amid bulging storages. The return of 2.7 GW of capacity to the German and Dutch power markets goes some way to easing fears of shortages with French nuclear capacity low, and European steel plants are eyeing up improved margins for 2021.

1. Fujairah oil stocks drop to eight-month low as market rebalances

 

Fujairah oil stocks

What’s happening? Stockpiles of refined oil products at Fujairah, the Middle East’s biggest storage hub, have hit an eight-month low, with shipments of naphtha and gasoil picking up, supporting signs that the global oil market is balancing as OPEC+ output cuts offset pandemic-hit demand. Total stockpiles stood at 20.961 million barrels as of September 28, down 2.2% from a week earlier and the lowest since January 13, according to data from the Fujairah Oil Industry Zone released September 30. Stockpiles have now dropped for five consecutive weeks, the longest losing streak since the five weeks ended July 1, 2019. The record losing streak was six weeks in a row in 2017.

What’s next? Markets continue to watch global crude and product stock movements for clues to the pace of economic recovery from the pandemic, particularly as a spike in coronavirus infections to new highs globally fuels concerns over a second wave of lockdowns.

 

2. Europe well placed for gas supplies over winter…

 

EU gas storage

What’s happening? With EU gas storages at around 95% full, Europe is again well placed to manage the upcoming winter from a security of supply perspective. Stocks have been built to almost capacity for the second consecutive year, the difference this time being that the risk of disruption to Russian imports via Ukraine is absent.

What’s next? With stocks almost full at the start of the new gas year, there is limited scope for further EU storage injections in the event of a warm October, and injection season in Ukraine – which has acted this summer as an “overflow” for European storage – also seems to have effectively finished. A ramp-up in gas supplies to Europe and warm weather could put pressure on the market.

Go deeper: Gas and power markets well supplied but nuclear a worry

 

3. …as gas plants emerge from mothballs

 

Europe coal vs gas power generation margins

What’s happening? Two gas-fired power stations with a combined 2.7 GW of capacity returned to the German and Dutch power markets at the start of October after years in the wilderness. Back on the system are Uniper’s Irsching gas plant in Bavaria and RWE’s Claus C plant in the Netherlands. Cheap gas and a rising carbon price are behind the power station returns, after years when the assets were on the verge of permanent closure due to cheap coal-fired generation. The boot is on the other foot now CO2 prices are back over Eur25/mt.

What’s next? It remains to be seen whether gas’ ascendancy over coal will be maintained over the winter. From very low levels over the summer, European gas prices have stabilized around the Eur12/MWh mark, pulling gas plant margins down and close to parity with comparable coal plant margins. Meanwhile, the power station returns should ease fears of capacity shortages due to low French nuclear availability. There is enough fossil plant around to fill any thermal gap caused by a nuclear shortfall, but this would be at an economic and carbon cost.

4. European steel plants eye improved margins in 2021

 

European steel margins

What’s happening? European hot-rolled coil steel to raw material price spreads turned sharply higher in September, as an increase in spot steel prices outpaced stronger coking coal and iron ore costs, according to S&P Global Platts estimates. The spreads show the steel industry moving back toward profitability after several quarters of weak margins.

What’s next? European steel plants are looking at lower forward iron ore prices, and for higher steel prices and demand to sustain improved margins into 2021. Potential weaker demand due to coronavirus-related disruptions is weighing on the sector. Moves to invest in new facilities to lower emissions hinge on underlying steel operating metrics attracting capital for Europe’s steel sector.

Reporting by Rob Perkins, Stuart Elliott, Henry Edwardes-Evans, Hector Forster



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China’s purchases of U.S. farm goods at 71% of target under trade deal: U.S. By Reuters

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© Reuters. Senate Finance Committee hearing on U.S. trade on Capitol Hill in Washington

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WASHINGTON (Reuters) – China has substantially increased purchases of U.S. farm goods and implemented 50 of 57 technical commitments aimed at lowering structural barriers to U.S. imports since the two nations signed a trade deal in January, the U.S. government said on Friday.

In a joint statement, the U.S. Trade Representative’s (USTR) office and the U.S. Department of Agriculture (USDA) said China had bought over $23 billion in U.S. agricultural goods to date, or about 71% of the target set under the so-called Phase 1 deal.

“Since the Agreement entered into force eight months ago, we have seen remarkable improvements in our agricultural trade relationship with China, which will benefit our farmers and ranchers for years to come,” U.S. Trade Representative Robert Lighthizer said in a statement.

The deal defused a bitter trade war between the world’s two largest economies, but disputes over human rights, the COVID-19 crisis and technology have strained ties between Washington and Beijing, raising doubts about the prospects for deepening the agreement in a second phase.

Agriculture is one of the four areas where China pledged to increase its purchases of U.S. goods and services. Many experts question whether China will meet its overall targets this year given lockdowns imposed earlier this year to contain the virus.

The report showed outstanding sales of U.S. corn to China were at an all-time high of 8.7 million tons, while U.S. soybeans sales for marketing year 2021 to China were at double the levels seen in 2017.

U.S. exports of sorghum to China from January to August 2020 totaled $617 million, up from $561 million for the same period in 2017, it said.

U.S. pork exports to China hit an all-time record in just the first five months of 2020, and U.S. beef and beef products exports to China through August 2020 are already more than triple the total for 2017, it said.

In addition to these products, USDA expects 2020 sales to China to hit record or near-record levels for other U.S. agricultural products including pet food, alfalfa hay, pecans, peanuts, and prepared foods.

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Democrats in U.S. drilling states push back against Biden oil remarks By Reuters

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© Reuters. Final 2020 U.S. presidential campaign debate in Nashville

By Nichola Groom

(Reuters) – Democratic candidates in oil drilling states were quick to distance themselves on Friday from comments by their party’s presidential candidate, Joe Biden, that indicated he would move the United States away from a reliance on oil.

From Texas to Montana, Democrats locked in tight congressional races in Nov. 3’s general election took to Twitter to affirm their support for the fossil fuel industries and workers in their states.

“I’ll always stand up to my party when it’s out of touch with our Montana way of life,” Governor Steve Bullock, who is running for U.S. Senate, tweeted on Friday.

President Donald Trump, who trails Biden in national opinion polls, accused his rival in their final presidential debate on Thursday of planning to destroy the oil industry, leading the former vice president to respond that he did believe the country should eventually replace oil with solar, wind and other forms of non-polluting power.

“I would transition from the oil industry, yes,” Biden said.

“He is going to destroy the oil industry,” Trump said. “Will you remember that Texas? Will you remember that Pennsylvania, Oklahoma, Ohio?”

After the debate, Biden told reporters he was referring to a plan to stop subsidizing fossil fuels: “… they’re not going to lose their jobs. Besides, a lot more jobs are going to be created in other alternatives.”

Trump’s campaign seized on Biden’s remarks, promoting a new advertisement on Friday that said thousands of drilling jobs were at stake in the battleground state of Pennsylvania.

“I disagree with VP Biden’s statement tonight,” Democratic Representative Xochitl Torres Small, whose district includes portions of New Mexico’s oil-rich Permian basin, tweeted after the debate, saying the country should not “demonize a single industry.”

Polls show Torres Small in a tight race against Republican opponent Yvette Herrell, who she narrowly unseated in 2018.

Torres Small said she was willing to break with her party on the issue, a sentiment echoed by Bullock, who briefly sought the Democratic presidential nomination himself, and U.S. Representative Kendra Horn of Oklahoma.

U.S. Representative Lizzie Fletcher, a Democrat running for re-election in Houston, the capital of the U.S. oil industry, said in a statement that Biden’s comments “fail to address the complexity of our energy needs and plan for our future.”

Biden says his $2 trillion plan to combat climate change through investment in clean energy will create millions of jobs, a stark contrast to Trump administration policies that promote fossil fuel development and play down the threat of climate change.

Nationally, Biden’s plan enjoys the support of two-thirds of voters, according to a New York Times/Siena College poll this month. But in states where the oil industry is a major employer, many voters are skeptical of a move away from fossil fuels.

Democratic vice presidential nominee Kamala Harris said Trump was blowing her running mate’s comments out of proportion.

“The president likes to put everything out of context,” the California senator said at a campaign stop in Atlanta.





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Gold Looks For Footing After Pause Button Hit on U.S. Stimulus By Investing.com

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© Reuters.

By Barani Krishnan

Investing.com – Gold rose in Friday’s trade but settled down a second week in a row as the yellow metal tried to find a floor after the White House and Congress hit the pause button on the Covid-19 stimulus drama, suggesting a major relief will be passed only after the Nov. 3 U.S. election.

settled at $1,905.20 on New York’s Comex, up 60 cents, or 0.03%. For the week though, it was down 0.1%, following through with the previous week’s 1% drop.

, which reflects real-time trades in bullion, was flat at $1,904.10 by 2:40 PM ET (18:40 GMT). Bullion also showed a 0.3% gain on the week versus a decline of 1.6% from the week earlier.

White House officials, including Chief of Staff Mark Meadows and Press Secretary Kayleigh McEnany, said negotiations for a stimulus with Nancy Pelosi, speaker of the opposition-led Congress, have virtually ended after two weeks of inconclusive talks.

U.S. Treasury Secretary Steven Mnuchin, who was directly involved in negotiations with Pelosi, said significant differences remained between the two sides.

Congress approved a Coronavirus Aid, Relief and Economic Security (CARES) stimulus in March, dispensing roughly $3 trillion as paycheck protection for workers, loans and grants for businesses and other personal aid for qualifying citizens and residents.

Democrats have been locked in a stalemate since with President Donald Trump’s Republican party on a successive package to CARES. The dispute has basically been over the size of the next relief as thousands of Americans, particularly those in the airlines sector, risked losing their jobs without further aid.

Buyers plowed into gold earlier this week on speculation that the Trump administration could bridge the gap between its $1.9 trillion offer and the $2.2 trillion sought by Pelosi and the Democrats. But as the week dragged on, both sides dug their heels in, negating any likelihood for a deal ahead of the Nov. 3 presidential election, in which Trump faces Democrat candidate Joe Biden.

Trump, reinforcing the stance of his administration and the Republicans, tweeted on Friday that he would never fund Democratic-run states under the stimulus.

Despite the standoff, gold prices weren’t tanking as investors were pricing in the possibility of a huge Biden win in the election, based on polls, and the likelihood of a major stimulus issued thereafter, analysts said.

“History shows that almost every government struggling with instability does the same thing: Spend money,” said Adam Button, managing editor at ForexLive.

“The case for gold is overwhelming. We’re still in a seasonally weak spot but if there’s some weakness in November, it will be time to buy. If not, buy in December at any price.”

Comex gold hit record highs of nearly $2,090 an ounce in early August as speculation for a second round of CARES peaked then. However, the yellow metal fell almost $250, or 12%, from those highs in recent weeks as the speculation for another Covid-19 deal fizzled and the dollar rallied instead.

The , which pits the greenback against six major currencies, was down 0.2% at 92.8 on Friday after standing as high as 94.8 in September.





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