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Oil Traders Assess Bank Shock at Swiss Palace Meetup – Bloomberg

Chinese fuel consumption is booming again, even if Western investors don’t believe it. (Bloomberg)

Grant Smith, Bloomberg News

LONDON
EnergiesNet.com 03 22 2023

For decades, commodities traders have looked to Switzerland as a hub of stability to anchor their turbulent industry. 

But as they gather at Lake Geneva this week, the merchants of oil and metals are assessing the fallout from the demise of one of the country’s most storied institutions — Credit Suisse Group AG.

The background music for this year’s FT Commodities Global Summit in Lausanne certainly has been ominous.

On Sunday, confidence that oil will rally this year frayed further as Goldman Sachs Group Inc. dropped its prediction that China’s reopening will propel Brent to $100 a barrel. 

Then, just as industry executives started to assemble at the opulent Beau-Rivage Palace hotel on Monday morning, US benchmark crude futures slumped below $65 a barrel for the time since 2021.

Meanwhile, time-spreads for Brent — a closely watched proxy for market tightness — buckled on fears that the banking contagion might spread and hurt fuel demand. 

For now, the trading houses appear undaunted. Trafigura Group says China is booming again, with restaurants packed and domestic travel roaring above pre-pandemic levels, even if Western investors don’t believe it.

“The further you are away from China, the less likely you are to believe in the China recovery,” chief economist Saad Rahim said.

Traders were even more upbeat in private. Crude prices have likely bottomed, and inadequate investment in new supplies promises a rebound, one executive said — even as the market abandons expectations for a serious loss of Russian supply. 

As for the demise of a venerable 166-year-old lender, the commodity merchants are equally unperturbed. Banks remain drawn to the short-term transactions of the industry, which raked in $100 billion during last year’s boom, they point out.

Yet trading executives do acknowledge that banking contagion poses a risk for any commodities bull run. And the next key test for that, they concede, lies not on the shores of a Swiss lake, but thousands of miles away, with Wednesday’s decision from the Federal Reserve.

–Grant Smith, Bloomberg News

Lithium prices chart

The frenzy for lithium, which saw Chinese prices of the electric-vehicle battery material surge more than 1,300% in just two years, has turned into a rapid retreat. Prices of lithium carbonate, the benchmark product, have halved since rocketing to a record in November, according to data from Asian Metal Inc. That reflects two major pressures: the prospect of much more global supply coming online this year and signs that the breakneck growth of China’s EV sector is starting to moderate.

Today’s Top Stories

JPMorgan Chase & Co. owned the London Metal Exchange nickel contracts that turned out to be backed by bags of stones rather than metal, according to people familiar with the matter. The LME last week said it canceled nine nickel contracts — worth about $1.3 million — after discovering “irregularities” at a warehouse, which Bloomberg has reported was owned by Access World.

China’s appetite for Moscow’s oil, gas and coal has soared since the invasion of Ukraine. Beijing’s spending on Russian energy — including crude oil and products, coal and natural gas — ballooned to $88 billion in the year through February from $57 billion a year earlier, according to Chinese customs figures.

The European Union is activating a crisis reserve for farmers in three eastern nations handling an influx of Ukrainian crops that’s lowering local prices. The European Commission, the bloc’s executive, will provide €56 million ($60 million) to Romania, Bulgaria and Poland, Agriculture Commissioner Janusz Wojciechowski said.

A Chinese miner is set to overtake Glencore Plc as the world’s top cobalt producer as the rush for critical green-energy metals intensifies. The challenger is CMOC Group, which aims to double production this year as it brings a massive Congolese mine online in the second quarter.

Greenwashing in the food industry is “rampant,” according to a Dutch advocacy group. A report by the Changing Markets Foundation says many environmentally friendly claims found on labels and in advertising are exaggerated or unsubstantiated, with meat and dairy companies among the worst offenders.

Best of the Rest
  • Can smaller reactors help the UK meet its nuclear power targets? The Financial Times takes a look.

  • In several US states there’s a push to replace so-called peaker plants, which are mostly gas-powered, with lithium-ion batteries. But perhaps we shouldn’t take it as a “slam dunk” that batteries are the right way to transition away from gas in all cases, Maximilian Auffhammer writes in this blog for UC Berkeley’s Energy Institute at Haas.

  • Silicon, gold and copper can be used to destroy the spike proteins of SARS-CoV-2, the virus that causes Covid-19, mining.com reports, citing a Curtin University research paper in the journal Chemical Science.

— With assistance by Annie Lee

bloomberg.com 03 21 2023

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