Commerzbank Commodities Radar April 2022

Commodities radar at a glance

Source: Bloomberg data

Tight supply results in higher oil price

The price of oil rose sharply since the start of the year – and this trend accelerated further after Russian troops invaded Ukraine at the end of February. As a consequence, Brent almost reached the record price from the summer of 2008 at the beginning of March at just under US$140 per barrel, and gasoil hit a record high of USD 1,665 per ton a few days later. In response to the Russian invasion, the West imposed comprehensive sanctions. As a result, a considerable proportion of Russia's oil supply has become impossible to sell, which further exacerbated existing concerns about a shortage of supply. However, the market has calmed down again in recent weeks and prices have surrendered most of their gains.

The oil market was already tight before the military escalation in the Russia-Ukraine conflict. According to the International Energy Agency (IEA), global oil inventories in February were 714 million barrels below the end-2020 level. One reason for this was higher-than-expected demand. The Omicron wave did not thwart demand, contrary to initial fears, despite very high infection numbers. At the same time, OPEC+ has failed for months now to fully implement the production increases agreed upon: OPEC+ oil production in March was 1.5 million barrels per day below the planned level. The oil market was therefore not in oversupply at the beginning of the year, contrary to previous forecasts. Based on IEA data, it was in fact roughly balanced.

Price of Brent crude oil in USD per barrel

Due to the sanctions, oil production in Russia is expected to fall sharply in the coming months. The IEA expects a decline of 3 million barrels per day from May. The gap between agreed and actual OPEC+ production volume is therefore likely to widen even more in the months ahead, should Saudi Arabia and other countries with spare production capacities refrain from expanding their production more strongly. According to the IEA, the sharp decline in Russian oil production should nevertheless not lead to a supply deficit in the second quarter, as oil demand is also significantly weaker as a result of the war in Ukraine and the corona lockdown in China. Only in the second half of the year the market is expected to be slightly undersupplied. IEA member countries have also announced an unprecedented release of 240 million barrels from strategic oil reserves, which should prevent an undersupply in the coming months.

Inventories of middle distillates were a good 80 million barrels below the five-year average in February. Europe accounts for around 50 million barrels of this. Gasoil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) region are at their lowest level since 2014. The diesel market in Europe is therefore very tight already. Moreover, Russia is not only a major exporter of crude oil but of diesel, too. This is particularly significant for the European market, which receives up to 80 percent of its diesel net imports from Russia.

The price of Brent oil is likely to trade above US$100 per barrel up to mid-year before falling back to US$90 thereafter. This is based on the assumption that the supply situation will ease in the course of the year due to the release of the oil reserves and that there will be no EU oil embargo against Russia. The price of diesel should then fall, in line with Brent, to US$780 per ton by the end of the year.

Source: Commerzbank Research, as of: 29.04.2022

The year’s price highs and lows at a glance

in EUR per unit in EUR per unit
Precious metals Agricultural products
Gold per troy ounce High
Low
1,874.04
1,448.84
Cocoa per mt High
Low
2,205.52
1,854.74
Palladium per troy ounce High
Low
2,898.54
1,422.35
Coffee per pound High
Low
2.26
1.03
Platinum per troy ounce High
Low
1,057.57
780.06
Cotton per pound High
Low
1.26
0.66
Silver per troy ounce High
Low
24.13
18.56
Maize per mt High
Low
379.00
211.50
Sugar per pound High
Low
0.18
0.12
Wheat per mt High
Low
396.50
198.25
Industrial metals Energy
Aluminium per mt High
Low
3,548.87
1,871.23
Brent Crude Oil per barrel
High
Low
116.95
52.60
Copper per mt
High
Low
9,794.98
7,438.95
Coal per mt
High
Low
401.17
56.37
Iron Ore per mt High
Low
188.41
75.85
Diesel per mt High
Low
642.75
338.77
Lead per mt High
Low
2,249.43
1,640.11
Electricity per MWh
High
Low
418.93
47.76
Nickel per mt High
Low
44,322.76
13,291.15
EUA per tonne High
Low
96.93
42.81
Tin per mt High
Low
44,654.12
22,660.32
Gasoil per mt High
Low
1385.35
419.51
Zinc per mt High
Low
3,819.26
2,294.77
Jet Fuel per mt High
Low
1312.84
435.37

Source: Bloomberg data, period: 04/01/2021 - 03/31/2022

From the perspective of German companies, the listed commodities are generally priced in a foreign currency. For this reason, currency risks need to be considered in addition to commodity price risks.

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