Commodity Wrap - Oil, Natural Gas, Gold, Palladium (28.02.2023)

Oil:

• Saudi Arabia plans to increase oil export prices for deliveries to Asia

• Russia halts pipeline oil flows to Poland

• In spite of the fact that a lot of Russian oil is still entering the market, what is evidence by pick up in US oil inventories

• US oil companies are still focused on boosting dividends, buybacks and lowering carbon footprint rather than boosting output, what may become an issue once global economy returns on the growth track

• US companies may also want to take advantage of relatively still-high prices to repay debts, like is the case with Occidental Petroleum

• JPMorgan maintains its Brent price forecast for this year at $90 per barrel

Natural Gas:

• Natural gas rebounds and trades at the highest level since the beginning of February

• Another winter attack cannot be ruled out in the US in the coming weekend. Forecasts point that temperatures are expected to drop almost all across the United States, spare for southern-eastern states

• On the other hand, US natural gas stockpiles remain at a very high level and continue to climb even more above 5-year average and last year's levels

• Meanwhile, European natural gas prices drop below €50 per MWh. European stockpiles are 62% full - significantly above 5-year average for this period of the year

Temperatures in the United States are expected to drop significantly in the coming days. Source: NOAA

Gold:

• Gold continues to move lower amid with stronger dollar

• Greenback gains thanks to solid US data, which reinforced the case for further monetary tightening from the Fed. Some analysts expect that interest rates will increase to 5.5%

• Demand perspectives seem to be quite solid, looking at the buying activity of the official sector in 2022 (recently revised data from WGC showed that last year central banks was bought largest amount of gold in history -1,136 tonnes, while previously assumed it was the biggest shopping spree since 1955)

• Fresh import data from India and China show a considerable decline on annual basis, which may be related to the recent strength of US dollar

• In addition, ETFs continue to sell out gold holdings. At the beginning of the year, outflows reached highest level in 4 seasons

Gold remains under pressure due to the strong dollar. In nominal and percentage terms, gold in February 2023 recorded the sharpest decline since mid -2021. Potential drop below $1800 would pave a way towards a major support zone around $1780-1790. Source: xstation5

Palladium:

• Pallad remains under pressure, even despite recent impressive rebound of platinum prices

• About 80% of the demand for palladium comes from the car sector, while in the case of platinum this figure drops below 40%. That is why further slowdown in the automotive sector could have negative impact on palladium prices

• According to SMM, which is a company that analyzes metal market in China, palladium and platinum outlook will most likely improve in the second half of the year, but in the near future prices may remain under pressure

There is a chance that palladium prices will move lower towards  $1300 in the near future. What's more, palladium and platinum may attempt to close the divergence gap. Source: xstation5