The convenience corner: Guise and dollars

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The fall in prices of two key commodities – oil and copper – last week told us something investors hadn’t heard.

At the same time, a surprise surge and then a cooling in the price of nickel provided a timely reminder of underlying weakness in key metals.

The message is that commodity markets are still dominated by the interplay of the value of the US dollar and demand concerns in 2023, especially with most economies set to slow.

This is why oil prices lost ground last week as Brent and West Texas Intermediate (WTI) fell sharply on Thursday and Friday.

Copper also fell as belief faded that the U.S. dollar would continue to fall as the U.S. Federal Reserve directed a central bank “pivot” to a lower, slower pace of growth.

This “pivotal” idea now seems like a distant dream.

The US Dollar ended with a slight gain for the week and the Australian Dollar finished above 66 US cents.

Brent fell 8.7% during the week – ending at US$87.62 a barrel and WTI fell almost 10% to end at just over US$80 a barrel.

December crude oil fell 1.6% on Friday, adding to Thursday’s 4.16% drop in two surprisingly negative days for Brent and WTI.

With missiles falling in neighboring Poland and killing two farmers, oil rose for a brief moment, but the potential hotspot quickly cooled as the United States quickly dismissed the theory of Russian responsibility.

Prices reacted more to the latest forecast from OPEC, which again lowered its oil demand forecast due to the slow reopening of China, still strangled by its zero-Covid policy.

There have been more than 20,000 cases a day across China for the past six days, which is a high of about six and a half months. Nearly 25,000 on Saturday.

Lower demand forecasts from OPEC pointed to a gloomy picture for the global economy in 2023, which weighed on investor sentiment.

Bloomberg reported on Friday that the G-7 countries plan to announce their Russian oil price cap this week – possibly on Wednesday. This could be positive, but also negative with the confused market.

The price cap aims to cap sales of Russian oil by prohibiting G-7 companies from providing the transportation and services needed to ship Russian oil anywhere in the world unless that oil is sold below price. ceiling.

Bloomberg said the cap is expected to come into effect for new (ship) bookings after Dec. 5.

The price cap embargo is expected to support global oil prices as it is likely to curb Russian oil exports and reduce global oil supply, but a further 0.75% rate hike by the Would the Fed in mid-December lower prices?

Baker Hughes reported Friday that active U.S. oil rigs in the week ended Nov. 11 increased by 9 rigs to a 2.5-year high of 622 rigs. That’s more than tripled from the 17-year low of 172 rigs seen in August 2020, further suggesting an increase in crude oil production capacity in the United States next year.

The number of gas rigs increased by two to 157. The total number of U.S. rigs is up 219 rigs from last year’s count of 563, with oil rigs up of 162, gas rigs up 55 and miscellaneous up two.

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Metal prices are taking a breather after their strong rally since the start of the month with nickel rising and falling in an unexplained mini-repeat of the big price boom and bust earlier in the year.

All eyes are on China and its new measures to boost demand for metals as Covid cases continue to mount. Out of nowhere, nickel surged mid-week to break above the US$30,000 mark and ended Friday around US$25,300 a tonne for the January metal.

This saw the metal fall almost 6% over the week after hitting US$30,223 per tonne. It had risen 20% in five days and fallen 15% in three days to last Friday.

LME copper fell slightly to around US$8,050 a tonne, but Comex copper in New York lost more than 8% to end at US$3.63 a pound.

Iron ore prices nearly broke through the US$100 a tonne mark but could only hit US$98.60 on the SGX (Singapore Stock Exchange Commodity Market) on Friday, up 7, US$32 per tonne over the week.

Newcastle thermal coal hit $335 a tonne after falling below $300 a tonne.

The December price jumped 12% during the week while the January-February contract rose 7.7% to hit US$306.50 a tonne on Friday.






Glenn Dyer

Glenn Dyer has been a financial journalist and television producer for over 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.


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