Oil prices return to the frontline of commodity markets this week with the OPEC+ group meeting this Wednesday to decide on the level of production quotas for the start of 2023.
Analysts don’t see any change, especially any move to allow production to rise.
Oil prices have been weak since 2023 started – US West Texas Intermediate is down 1.6% and the global marker, Brent is up less than 1%.
That’s despite a 1.5% drop in the value of the US dollar. and gains by other industrial commodities and large gains by some stockmarkets.”OPEC’s Joint Ministerial Monitoring Committee (JMMC) meets next Wednesday and all indications suggest that they will stay the course on the 2 mb/d production cut as they wait to assess the durability of the China reopening as well as the impact of the next round of European energy sanctions on Russian exports,” Helima Croft, Head of Global Commodity Strategy and MENA Research, at RBC Capital Markets, said in a note on Friday.
The China re-opening story is supposed to be a driver of higher oil demand and prices but actual import levels, though lower in recent months than in 2021, are not expected to change very much.
A cold snap in China, Japan and the rest of north Asia sent demand for electricity soaring last week but that has had little impact on LNG prices in the region which continue around $US20 a million British Thermal Units, down $US2 in the past week or so.
Prices for out months are around $US18 heading into the norther summer, and around $US21 heading into the next northern winter, which is much lower than the $US50-$US60 seen in the middle of last year after the Russian invasion of Ukraine.
Thermal coal prices continue to fall – especially for higher quality product priced on the Newcastle price which is now around $US356 a tonne for the about to finish January contract and $US266 a tonne for the February contract. That was down nearly 13% in the week.
Oil drilling activity continues to ease in the US – especially in fracking basins like the Permian with numbers down to five-month lows but the number of active gas rigs continues to edge higher.
The number of oil rigs operating in the US fell by four last week, according to energy-services firm Baker Hughes.
The count dropped to 609. A year earlier, the US had 495 oil rigs in operation.
Oil and gas rigs in the US remained unchanged at 771. Gas rigs rose by four to 160, while miscellaneous rigs remained unchanged at two.
In the same period of 2022, there were 115 gas rigs and zero miscellaneous rigs in operation. Overall, there were 610 rigs operating in the US a year ago.
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Industrial metal prices were firmish – tin rose again to around $US30,000 a tonne but that was only back to levels seen last June in the wake of the Russian invasion of Ukraine.
The Financial Times and other media blared on about the rebound in tin prices, but besides only recovering the levels of 8 months ago, some analysts point out that the price of the metal hit (briefly) $US50,000 a tonne in the wake of the Ukraine invasion by Russia.
The subsequent fall has been driven by weak demand from key industrial users such as carmakers, manufacturers and technology groups, on top of rising output.
Copper edged lower over the week, dipping by 0.60% to $US4.22 a pound on Comex. LME copper ended at just over $US9,200 a tonne on LME 3-month copper.
Chile, the world’s biggest producer, is struggling to boost production while major new and existing mine projects in several countries remain under pressure – Peru in particular – impacting supplies with little impact on prices, so far.
Silver fell 1.3% to $US23.53 an ounce and Comex gold closed off 0.1% at $US1,928.60.
Some gold analysts say the rally in the metal from late 2022 is looking a bit overbought and this week’s Fed decision (and the commentary in the post meeting statement) could see the price slide.
Meanwhile iron ore prices made a small gain last week as the absence of Chinese buyers saw prices drift.
The price of 62% Fe fines on the Singapore Exchange ended at $US126.50 a tonne, the highest since last June and up from $US125.36 a tonne a week earlier.
The return of Chinese buyers and traders in force this week will make a difference.
