IEA Proposes Plan To Cut Daily Oil Demand By 2.7 Million Barrels – Commodity Roundup

–European benchmark natural gas prices are down 4.8% to EUR 100.00 per megawatt hour

–LME aluminum prices rise 3.6% to $3,383 per metric ton

–LME nickel prices are down 8% to $41,945 per metric for


TOP STORY:

IEA suggests lower speed limits and car-free Sundays to ease war’s oil shock

The International Energy Agency has rolled out a 10-point plan to reduce global demand for oil as it warned of an “emerging global energy crisis” triggered by the invasion of Ukraine by Russia.

The Paris-based group, which includes the United States, Japan and much of Europe, said on Friday that its long list of measures reminiscent of measures taken in the 1970s to deal with supply shocks oil at that time could lower demand by 2.7 million barrels per year. updated within four months if implemented by advanced economies.


OTHER STORIES:

Oil on track for weekly loss

Oil prices are expected to end the week down about 5%, extending a period of high volatility caused by the war in Ukraine. Brent futures, the global benchmark, edged up 0.5% on Friday to $107.24 a barrel. They were on track to fall 4.9% for the week as a whole. Brent fell 4.6% last week after jumping 25% in the first full week after the invasion.

Traders and brokers say the pullback was caused by investors and other participants pulling out of the market in the face of huge calls for funds from stock exchanges and their banks.

Inside the Nickel Market Failure: Massive Trades the Exchange Didn’t See

The war in Ukraine shattered the nickel market. The risks had been accumulating for years.

Banks and brokers have lent heavily to growers and speculators keen to take a stand on the humble metal, a key ingredient in stainless steel and electric vehicle batteries.

The London Stock Exchange, where the metals have been trading for 145 years, has not seen the growing danger.

“The simple fact here is that we didn’t have visibility on the scale of the risk,” said Matthew Chamberlain, chief executive of the London Metal Exchange.

The LME’s response to the crisis threatens its dominant position in the global metals market. It lingered when nickel trading spiraled out of control on March 7, then halted the market and wiped out $3.9 billion in trades the following morning, infuriating traders who had bet on the nickel price rising.

The shutdown left nickel companies rudderless for more than a week before limited and chaotic business activity resumed on Wednesday. The market was glitched, with prices falling below the LME’s newly imposed daily limits. Some trades moved below these levels, including early Friday, which led the LME to call off more trades.

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Energy minister says Brazil will increase oil production this year due to supply issues

Oil companies operating in Brazil intend to increase production this year after Russia’s invasion of Ukraine pushed up crude prices, according to Mines and Energy Minister Bento Albuquerque.

Companies including state-controlled Petroleo Brasileiro SA, or Petrobras, Shell PLC, Total Energies SA, Equinor ASA and Galp Energia SGPS SA have all indicated their willingness to accelerate production projects in the country, a- he declared.


MARKET TALKS:

Nickel prices could stabilize around $30,000 a ton

10:13 GMT – Nickel prices could stabilize around $30,000 a tonne on the London Metal Exchange, according to Rystad Energy. Nickel trading on the LME was halted for the previous two days after prices hit daily lower bounds of 5% on Wednesday and 8% on Thursday, the report said. The daily price limit was revised to 12% effective Friday, and prices have already reached that new threshold at $36,915 per tonne. LME nickel prices are expected to remain supported by low inventories amid disruptions to Russian nickel supplies, according to the energy consultancy. (yongchang.chin@wsj.com)

Worries mount over Ugandan gold exports after US sanctions

07:39 GMT – Fears are growing over the continued flow of Ugandan gold exports after the US Treasury Department imposed sanctions on the country’s largest gold refiner, African Gold Refinery, and its owner in a bid to removing conflict gold from global supply chains, Sasha Lezhnev, policy consultant at The Sentry, says. The measures targeting the Ugandan entity, one of Africa’s largest refiners which exports around 10 tonnes of gold each year, will disrupt the global gold supply chain, he says. “Closing one’s eyes to the gold of conflict now has a heavy toll,” says Lezhnev. Since the beginning of the year, Ugandan gold traders have already been in a standoff with the Ugandan government over new taxes on gold exports. (nicholas.bariyo@wsj.com)

U.S. Natural Gas Prices May Rise on LNG Export Demand

0705 GMT – U.S. natural gas prices could rise on stronger demand for liquefied natural gas exports, Goldman Sachs said, noting high gas utilization rates at LNG export plants in the United States. The Russian invasion of Ukraine has prompted European end users to wean themselves off Russian natural gas supplies and US LNG exports could fill the void, the report said. The market also looks tight, Goldman says. “With producer discipline still keeping supply growth well below pre-pandemic levels, we believe U.S. natural gas prices should be supported.” US Henry Hub natural gas futures for the first month fell 3.1% to $4.835/MMBtu. (yongchang.chin@wsj.com)

Brent Crude could hit $120 in Q2

03:44 GMT – Brent oil could hit $120/barrel in 2Q, Goldman Sachs says, lowering its forecast from $135/barrel previously to account for weaker Chinese demand. Worse-than-expected Covid-19 wave in China expected to drive down demand for crude as lockdowns reduce activity, but likely loss of some Russian export volumes still supports a sharp bullish view for prices oil, according to the report. Goldman forecasts Brent to rise to $110/bbl in 2023, still above futures prices, to account for a long-term decline in Russian production as Europe weans off imports from from Russia. Brent for the first month gained 2.3% to $109.06/bbl. (yongchang.chin@wsj.com)

Palm oil wins as rival oils strengthen

03:14 GMT – Palm oil prices rise at start of Asian trade, taking inspiration from stronger soybean oil on the CBOT and higher crude oil prices, a palm oil-based trader says in Kuala Lumpur. Soybean oil is a close substitute for palm oil, while higher crude oil prices would encourage the use of biofuels derived from vegetable oils. The lack of clear signals from ceasefire talks between Russia and Ukraine is raising new concerns about prolonged and tight supplies in the global vegetable oil market, he says. The benchmark Bursa Malaysia Derivatives contract for June delivery gains 74 ringgits ($17.64) at MYR 6,010 a tonne. (chester.tay@wsj.com)

Disruptions to Russian crude exports are likely smaller than expected

0302 GMT – Disruptions to Russian oil exports are likely to be smaller than expected, according to Goldman Sachs. While many European refiners have pledged to take less Russian crude, this will likely be limited to the spot market, according to GS. However, not all spot volumes would be lost; Goldman believes some cargo is still changing hands under the radar, noting that many ships disable satellite trackers. In addition, oil flows via long-term contracts, which could account for half of maritime exports, are less likely to be disrupted, he says. Still, Europe’s promise to wean off Russian oil should still mean some export losses are likely in the longer term, he adds. (yongchang.chin@wsj.com)


Write to Giulia Petroni at giulia.petroni@wsj.com


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Felix J. Dixon