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Commodity Tracker: 4 charts to watch this week

Summary:
In this week’s pick of commodity and energy market trends, gold and copper prices send signals about the global economy, and US oil infrastructure build-out affects the price relationship between WTI and Brent crude prices, S&P Global Platts editors report. 1. Gold and copper track diverging paths as economies stutter   What’s happening: Gold is rallying in the face of a deteriorating economic outlook, while copper is getting hammered on the same metrics. Copper has fallen from a 2019 year-to-date high of ,608.5/mt in April, to trade around ,750/mt currently. Gold is trading around seven-year highs at some ,520/oz. “Doctor Copper” has traditionally been a barometer for the overall health of the global economy, while gold remains a safe haven in choppy waters. What’s next: A

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In this week’s pick of commodity and energy market trends, gold and copper prices send signals about the global economy, and US oil infrastructure build-out affects the price relationship between WTI and Brent crude prices, S&P Global Platts editors report.

1. Gold and copper track diverging paths as economies stutter

 

Commodity Tracker: 4 charts to watch this week

What’s happening: Gold is rallying in the face of a deteriorating economic outlook, while copper is getting hammered on the same metrics. Copper has fallen from a 2019 year-to-date high of $6,608.5/mt in April, to trade around $5,750/mt currently. Gold is trading around seven-year highs at some $1,520/oz. “Doctor Copper” has traditionally been a barometer for the overall health of the global economy, while gold remains a safe haven in choppy waters.

What’s next: A deteriorating industrial and manufacturing outlook is bullish for bullion and exactly the opposite for copper. The trade spat between the US and China will continue to be a key driver of sentiment. Until some kind of resolution is achieved between the two economic powerhouses, the only thing that’s certain is, well, uncertainty – which would tend to reinforce gold’s role as a safe haven and put more pressure on copper.

  

2. EU carbon reforms face major test after 2019 price recovery

 

Commodity Tracker: 4 charts to watch this week 

What’s happening? EU carbon prices are vulnerable to the effects of a recession, which would cut demand for allowances across the European economy. However, during previous downturns in 2008 and 2011, the EU ETS lacked any protective measures, allowing the surplus to exceed 2.2 billion mt. That changed in January 2019, when the Market Stability Reserve (MSR) became operational.

What’s next? A lot depends on the outcome of Brexit as well as the impacts of wider international trade disputes. Any future recession could hit demand for EU carbon allowances, but the surplus will be controlled by the MSR, limiting the downside for prices. The MSR will reduce the surplus each year until it falls below 833 million mt.

 

 3. US oil pipeline buildout cuts Brent-WTI spread

 

Commodity Tracker: 4 charts to watch this week

What’s happening:  The differential between Brent and WTI crude prices has narrowed significantly in the past few months. The shift reflects confidence that crude oil pipeline transportation constraints will ease between the Permian basin to refineries and export terminals on the US Gulf Coast.  Global commodities trader Trafigura AG said recently it has started shipments of Permian basin crude to the Corpus Christi oil hub in Texas via the new Cactus II pipeline system. The Brent-WTI spread was above $5.00/b in late May but stood at $1.16/b on August 15.

What’s next:  The Cactus II pipeline, which could see flows of 300,000 b/d in August, is the first of three large pipelines expected to start up this year and ease the bottleneck that has helped curb US oil prices. This will be followed by EPIC Midstream Holdings LP, which has begun filling a new 400,000 b/d oil pipeline, planned to start exporting from its own South Texas terminal by the end of this year.  Meanwhile, pipeline operator NuStar Energy LP has completed a project connecting a pipeline in South Texas to Plains All American LP’s 670,000 b/d Cactus II pipeline system that brings Permian crude to the Corpus Christi area.

 

4. Europe’s gas glut sends storage levels soaring

 

Commodity Tracker: 4 charts to watch this week

What’s happening: Natural gas storage inventories in Continental Europe, at 56 Bcm, are close to overtaking the 5-year range record, with more than a month until the start of the next gas year.

What’s next: Strong storage injections have been incentivized by healthy storage spreads, in excess of Eur7/MWh, and a contango of more than Eur1/MWh in the near term forward curve. Strong sales on Gazprom’s Electronic Sales Platform and favorable economics for LNG deliveries to Europe next month could provide further support to gas injections through the next six weeks, and are likely to bring stocks near full capacity by the end of September.

Reporting by Ben Kilbey, Frank Watson, Paul Hickin, Chris Vanmoessner and Fabio Reale

The post Commodity Tracker: 4 charts to watch this week appeared first on Platts Insight.

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