Turkey, UN Eye Sea Lane for Grain Through Ukraine's Mines — Commodities Roundup

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MARKET MOVEMENTS:

–Brent crude oil is up 0.3% to $118.284 a barrel

–European benchmark gas up 8.6% to EUR130.71 a megawatt hour

–Gold futures are up 0.8% to $1,834.70 a troy ounce.

–Wheat futures are up 0.2% to $10.52 a bushel

–Three-month copper prices are down 0.5% to $9,166.50 a metric ton

TOP STORY:

Turkey, UN Eye Sea Lane for Grain Through Ukraine’s Mines

Turkish and United Nations diplomats are discussing a new proposal for extracting grain currently blockaded in Ukrainian ports, by escorting freighters through a safe passage among the defensive mines that protect Black Sea ports amid the war with Russia.

The proposal is the latest effort by Turkey and the U.N. to transport Ukrainian grain out of the country. Russia’s invasion has left about 20 million metric tons of grain stranded in Ukraine, heightening fears of a global food crisis after months in which the war has already driven up the cost of food world-wide.

OTHER STORIES:

High US Fuel Exports Are Contributing to $5-a-Gallon Gas

A rapid rise in American fuel exports this year has helped push gasoline prices to a record $5 a gallon and is pressuring U.S. prices of natural gas, which hit the highest levels in over a decade earlier this month.

In recent months, companies and commodities traders have shipped more U.S. gasoline and diesel to Latin America and other foreign markets, reaping higher prices than the fuel could fetch domestically. They have also sent more liquefied natural gas, or LNG, to Europe after Russia’s invasion of Ukraine.

World’s Biggest Miner Scraps Immediate Thermal-Coal Exit

The world’s largest mining company abandoned the sale of its last thermal coal mine, and said it would aim to close the Australian pit in 2030.

Despite record-high coal prices, BHP Group Ltd. said it failed to find a buyer for the Mt Arthur mine, which is one of Australia’s biggest coal operations but is technically complex and will have a large cleanup bill when it closes.

Norway’s Equinor Agrees With Centrica to Deliver Additional Gas to UK

Norwegian energy group Equinor ASA said Thursday that it has signed an agreement with British energy supplier Centrica PLC to deliver additional gas supplies to the U.K. over the next three winters.

The new supply agreement adds around 1 billion cubic meters a year to Equinor’s existing, bilateral contract with Centrica and brings the total volume under the contract to more than 10 BCM a year, it said. Centrica owns the U.K.’s largest power-and-gas retailer, British Gas.

Equinor typically supplies 20-22 BCM of natural gas to the U.K. every year, which covers more than 25% of the country’s gas demand, it said.

Petrotal Corp. Tenders 720,000 Barrels of Oil as Peru Pipeline Temporarily Reopens

Petrotal Corp. said Thursday that around 720,000 barrels of oil from the Bretana field have been tendered at the Bayovar Port in Peru for the July lifting.

The London and Toronto-listed oil-and-gas company said it has been able to deliver a material amount of oil to Bayovar in recent weeks following a temporary reopening of section II of the northern Peruvian pipeline.

MARKET TALKS:

Copper Supply Concerns May Emerge When Demand Rises

1054 GMT – Copper supply concerns may be brought to the fore when demand for the base metal increases, a Kotak Securities analyst says. The world’s top producers, Chile and Peru, have witnessed major supply disturbances this year, Kotak says, noting that the countries combined represent about 40% of the global supply. Chile’s copper output fell 7.4% on year in the January-April period, while about 20% of Peru’s output is at risk due to tensions at major mines, it says. Besides, major producers including Glencore, Southern Copper and BHP have all cut their production guidance for 2022, Kotak adds, expecting LME copper prices to move within the $8,800 a ton to $10,200 a ton range in the next three months. LME three-month copper drops 1.3% to $9,114.00 a ton. (clarence.leong@wsj.com)

Oil Wavers as Investors Mull Fed Rate Hike

0837 GMT – Oil prices are little changed after U.S. oil inventories rose by more than expected and as investors parse the effect on the economy from the Federal Reserve’s 0.75 percentage-point rate rise. Brent crude is up 0.2% at $118.45 a barrel, while WTI adds 0.2% to $115.42 a barrel. Data from the Department of Energy on Wednesday showed U.S. oil stocks rose by almost 2 million barrels when analysts had been forecasting a decline of 1.4 million barrels. Investors were still parsing the impact of the Fed’s rate increase. Risk assets rallied on Wall Street on Wednesday after the rate hike, but risk sentiment has turned sour Thursday with global stocks and U.S. stock futures slumping. (william.horner@wsj.com)

Fed Rate Hike Stems Metals Losses

0737 GMT – Metals prices are stabilizing after the Federal Reserve raised interest rates by 75 basis points late on Wednesday. Gold futures in New York are up 0.5% to $1,829.20 a troy ounce having closed 0.3% higher a day previous. Copper meanwhile is 0.1% lower at $9,200 a metric ton, having risen 0.7% following the rate increase. Sentiment for metals has remained weak given the macroeconomic forecast of rising inflation rates and China’s strict Covid-19 policy hampering a restart in industrial activity. “It does seem like they are trying to kick the can down the road when it comes to a recession in what the Fed calls a ‘soft landing’,” analysts at Marex say in a note. (yusuf.khan@wsj.com)

Zambia Sees Potential in Mopani Copper Mines

0718 GMT – Zambia state miner, ZCCM-IH hopes to turn around operations at Mopani Copper mines to ensure sustainability and continued development of the country’s third-largest metal producer, says Loisa Mbatha state miners corporate manager. Zambia has sought the services of French investment bank Rothschild & Co to assess strategic options for the 200,000 metric tons-a-year copper miner, as Africa’s No.2 copper and cobalt producer continues efforts to boost production amid growing demand driven by a global energy transition. “ZCCM-IH is committed to see that MCM delivers to its optimal production levels in order to contribute to the national production target of three million metric tons of copper by 2030,” Mbatha says. (Nicholas.Bariyo@wsj.com;@Nicholasbariyo)

Steel Prices to Stay High on Chinese Infrastructure Demand, Ukraine War

0328 GMT – Steel prices could trend higher as Chinese infrastructure demand kicks in from 2H onward, analysts from Fitch Solutions say in a note. “China seems to be looking at increasing its financial support to the economy in 2022, amidst weakening economic growth prospects driven by real estate sector weakness and strict Covid-19-related lockdowns,” they say. “Demand recovery in China appears to be outpacing supply recovery as Covid-19 restrictions are eased.” Dwindling exports from Ukraine due to the Russian invasion as well as an unwillingness from some market participants to import Russian-made steel are also supporting prices of the construction material, the analysts add. (yongchang.chin@wsj.com)

Aluminum Rises, Aided by Upbeat Chinese Industrial Output Data

0215 GMT – Aluminum rises in the Asian morning session, helped by upbeat Chinese industrial output data released Wednesday, analysts say. National Bureau of Statistics data show that primary aluminum production in China rose for a second consecutive month in May to reach an all-time high, ING strategists say in a research note. Aluminum production jumped 3.1% on year and 1.8% on month to 3.4 million metric tons, as power constraints eased and aluminum smelters restarted operations together with the addition of new production capacity, the strategists add. The three-month LME aluminum contract is up 1.95% at $2,643.00 a ton. (ronnie.harui@wsj.com)

Write to Yusuf Khan at yusuf.khan@wsj.com