Commodities feed: Speculative trades boost Brent longs

ING Global Economics Team ING Economic and Financial Analysis

The oil rally appears to be running out of momentum. However, the oil balance remains constructive through the third quarter.

Energy – US drilling activity slows further

Oil markets settled higher for a second consecutive week last week. ICE Brent was up almost 3.2%. However, the market showed some weakness towards the end of the week and this has carried through into early morning trading today. Despite this, we remain supportive towards the oil market with a deficit over the third quarter set to tighten the oil balance. Speculators have also become more constructive towards oil as we move into summer. Speculators increased their net long in ICE Brent by 68,535 lots to 140,221 lots as of last Tuesday. Fresh longs entering the market and short covering drove the move fairly evenly.

Drilling activity in the US slowed further over the last week. The latest data from Baker Hughes shows that the number of active oil rigs fell by 3 last week to 485 - the lowest since January 2022. The gas rig count remained stable over the week at 98. Primary Vision’s frac spread count, which gives an idea of completion activity, also fell by 4 over the week to 246.

The ICE gasoil market has not reacted much to reports of further drone attacks on Russian refineries with 4 refineries targeted last week. The gasoil crack continues to trade around $20/bbl. One reason for the lack of response is that export flows continue largely unaffected. Russian middle distillate exports stand at around 4.32m tonnes so far in June according to LSEG data, which is the fourth consecutive month of increases in exports and the highest volume exported at least since the start of 2023. In addition, inventories remain comfortable. The latest data from Insights Global shows that gasoil stocks in the ARA region increased by 57kt WoW to 2.26mt.

European natural gas prices settled more than 1.5% lower last week as concern over Russian pipeline supplies eased. The EU’s latest sanction package against Russia also did not include a full ban on Russian LNG, instead only banning the re-export of Russian LNG from EU ports. The move could see more Russian LNG remaining within Europe. Prices could come under more pressure today as Chevron resumed full production at its Wheatstone LNG facility in Australia over the weekend.

Metals – Global steel output edges higher

Weekly data from the Shanghai Futures Exchange (ShFE) show that copper inventories fell by 7,843 tonnes over the week to 322,910 tonnes as of last Friday. While this is the second week that copper inventories have declined, they remain well above seasonal norms due to sluggish demand and stubbornly high refined copper output.

Global steel production rose 1.5% YoY to 165.1mt in May, according to the World Steel Association, following higher output from major producers like China, India and Turkey. Cumulative global steel output remained almost flat at 793.2mt over the first five months of the year. Chinese steel production increased 2.7% YoY to 93mt, while output in India and Turkey rose 3.5% YoY and 11.6% YoY to 12.2mt and 3.2mt respectively last month.

Read the original analysis: Commodities feed: Speculative trades boost Brent longs

Author

ING Global Economics Team

ING Economic and Financial Analysis

From Trump to trade, FX to Brexit, ING’s global economists have it covered. Go to ING.com/THINK to stay a step ahead.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.