Commodities Update

Now Ukraine is making a real impact on commodities. UK gas is up 4.2% MTD. Europe has three months of gas demand covered in case of disruption and 65 days of demand in oil inventories, according to ENI CEO.

Brent is up 0.6% MTD at $107.28/bbl, while WTI is up 2.75% at $103.48/bbl. The geopolitcal risk has cranked up with the Kiev government giving Russian separatists until this morning to disarm & leave public offices while there continue to be reports of a large Russian troop presence on the Ukraine border. Libya’s western export terminal Zawiya has re-opened after being vacated by protesters. CFTC data released on Friday saw money manager long positions in futures & options for the week to 8 April rise by 24,310 to 380,000 contracts. North Dakota oil production averaged 951k b/d in February, +16k b/d from Jan & +170k b/d y/y.

Coal is up 49bps at $81.30/mt. Indonesian thermal coal exports dropped to 32mt in January, the lowest level in 5 months and down 9% YoY, according to official customs data. Steel inventory continues to be drawn down rapidly in China, with reported stocks held by traders falling 3.9% over the last week. Trader stocks are now 15% lower than a year ago. Inventory of rebar on the Shanghai Futures exchange also dropped sharply, falling by nearly 240kt to 2.5mt, the lowest level since the rebar contract started trading in June 2009.

CO2 is up 15% at €5.39/mt driven by higher coal and gas utilization in Europe on security of supply measures and expectations of EU backloading to withdraw 9m tonnes of oversupply.

US gas is up 5% at $4.65/mmbtu as the weather trade slowly unwinds after inventories rose 4 Bcf, below consensus expectations of a 15 Bcf injection. However, strength is derived from the fact that inventories are now 826 Bcf, widening the deficit vs the 5-yr avg to 994 Bcf.

UK gas opens is up 4.2% at 53.20p/th driven by the Ukraine dispute and Gazprom threatening to cut supplies to Ukraine. Inventories are still above 4,000 mcm.

Power prices reacted positively to gas spike. UK power is up 40bps at 50.40£/mwh, German power is up 58bps at €34.55/mwh and Nordpool up 0.16% at €29.65/mwh.

About Daniel Lacalle

Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Author of bestsellers "Life In The Financial Markets" and "The Energy World Is Flat" as well as "Escape From the Central Bank Trap". Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Frequent collaborator with CNBC, Bloomberg, CNN, Hedgeye, Epoch Times, Mises Institute, BBN Times, Wall Street Journal, El Español, A3 Media and 13TV. Holds the CIIA (Certified International Investment Analyst) and masters in Economic Investigation and IESE.

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