A big week for oil and analysts believe there will be more gains, even as inflation worries dominate US, Asian and European markets, rock bond yields and currencies and impact market momentum.
Oil prices rose on Friday, finishing the week with gains of about 4% as the global energy crunch boosted US prices to their highest in almost seven years as big power users struggle to meet demand, especially across Europe and China.
Even with worldwide energy demand growing as economic activity rebounds from pandemic lows, the OPEC+ group said they would continue to gradually reduce the size of their production cap and not step up the pace to put a lid on rising prices.
And while the US government said it was monitoring energy markets, it did not announce a release from strategic petroleum reserves, which some analysts had claimed would happen with the result that prices rose again.
Oil prices have surged more than 25% since late August, with Brent topping $US82 a barrel and US West Texas Intermediate crude hit seven years highs with another move above $US80 a barrel.
Brent crude futures rose 44 cents, or 0.5%, to settle at $US82.39 a barrel. Earlier in the week, the global benchmark hit a three-year high of $US83.47.
West Texas Intermediate (WTI) crude rose $US1.05, or 1.3%, to end at $US79.35. That was the highest close for the US marker since October 31, 2014. It hit a three year high in trading of $US80.11 a barrel on Friday.
US petrol futures also closed at their highest since October 2014 on Friday of $US2.2397 a gallon. That’s up 96% in the past year.
More and more analysts see the high petrol prices driving more US car buyers into switching to electric vehicles because of their cheaper running costs.
Meanwhile American energy firms added oil and natural gas rigs for a fifth week in a row last week, thanks to another rise in global prices.
The combined oil and gas rig count rose five to 533 in the week to last Friday its highest since April 2020, according to data from energy services firm Baker Hughes Co.
The total rig count was up 264 rigs, or 98%, over this time last year.
The number of oil-directed rigs rose five to 434, also the highest since April 2020, while gas rigs were steady at 99 for a third week in a row.
Analysts point out that despite the surge in gas prices in the past month, the number of gas-directed rigs remains lower than it was in July.
“Natural gas has been trading above $US4.00 (per million British thermal units) since the end of July, but not one producer felt they should sink one rig this week,” said Bob Yawger, director of energy futures at Mizuho in New York.
Reuters said that by way of comparison, American natural gas futures averaged $US2.13 in 2020 and $US2.66 over the past five years (2016-2020).
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Elsewhere in commodities, iron ore rose after the week-long Chinese holiday, gold eased, silver and copper rose.
Comex gold fell 0.23% to settle at $US1,757.40 (a fall of 0.1% on Friday) an ounce. Comex silver ended the week up half a per cent at $US22.685 an ounce but Comex copper did better with a gain of 1.6% for the week to end at $US4.27 a pound.
The price of 62% Fe fines delivered to northern China from the Pilbara rose $US6.36 a tonne on Friday to end at $US123.38. That was up more than 6% for the week, thanks to Friday’s jump which was the first active session after the Chinese holiday.
The price of 59% Fe fines rose $US4.64 on Friday to $US95.86 a tonne. That was up $US7.80 or more than 9%.
The price of coking and thermal coal both rose on Friday – the prime hard coal was priced at more than $US600 a tonne in the Chinese market and above $US400 a tonne elsewhere in Asia.
Thermal coal ex-Newcastle jumped $US6 a tonne or more (for the October contract) to over $US238 a tonne.
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Saturday saw China release 150,000 tonnes of industrial metals from its strategic reserves in the fourth round of sales this year as it continues a campaign to ease supply tightness and put a lid on high commodity prices.
China offered processors and manufacturers the chance to bid for 30,000 tonnes of copper, 70,000 tonnes of aluminium and 50,000 tonnes of zinc on online platforms operated by state-run China Minmetals Corp and Norinco.
The metal was sold off in small batches, typically of 100-250 tonnes.
Confirming the end of Saturday’s auctions in a statement, the National Food and Strategic Reserves Administration said it would continue to release inventories in the near future based on market supply, demand and prices.
Reuters said the Government did not disclose the names of the successful bidders or the price at which the metal was sold, nor was that information immediately visible on the platforms hosting the sales.
The sales take the total amount of metal released by China’s National Food and Strategic Reserves Administration so far in 2021 to 570,000 tonnes.
It has also sold an unknown amount of oil – to little effect.
Of course, metals are not what Chinese industry needs at the moment – it needs reliable supplies of energy, especially electricity to prevent rationing and rising costs.
That is not happening.
Coal producers in Inner Mongolia have been commanded to produce another 100,000 extra tonnes of coal in the next few months to try and help ease the shortage.
Supplies of banned Australian coal are being imported and used by a desperate government. And Chinese banks and other companies have been told to finance coal company balance sheets to allow extra tonnages to be produced.
