Commodities Update: Copper Supply Tightness and Stable EU Gas Inventory

The Commodities Feed: Supply tightness could support copper

Codelco has lowered its copper production guidance for the year due to production disruptions that could tighten the market. Meanwhile, copper inventories at LME and SHFE remain low.

 

Energy: EU gas inventory continues to increase at a stable pace

Crude oil prices continued positive momentum on Friday and ended the week on a high note with ICE Brent rising to around US$85/bbl while NYMEX WTI also strengthened to US$80.6/bbl. Market expectations of an extension of the supply cut by Saudi Arabia remain supportive of oil prices in the immediate term.

The price discount for Western Canada Select (WCS) crude oil over the WTI increased to around US$15.3/bbl last week as an unplanned outage and advanced maintenance schedule at BP’s Whiting refinery fuelled pessimistic sentiment. BP had to shut the 100Mbbls/d cat feed hydrotreater plant on Friday, which could push the maintenance schedule for the refinery from September to August. The 435Mbbls/d Whiting refinery is one of the major refiners of Canadian crude and early maintenance at the plant could result in lower demand for Canadian crude in the short term. Higher discounts also reflect the additional cost of transportation as the crude travels further for refining.

TTF gas prices retreated to below €26/MWh on Friday after increasing to €32.6/MWh earlier in the week. The supply side remains healthy, as reflected by inflows of gas into storage tanks. The EU gas inventory increased by another 22.6TWh over the week, taking the gas storage to 85.4% full as of 29 July. European gas storage currently is comfortably above the five-year average of around 70% for this point in the season. The gas injection has been consistent at around 20-23TWh per week for the last two months and at this rate, European gas storage could reach near-full capacity by the end of September 2023. Meanwhile, the discount of European gas prices compared to Asian LNG prices increased to an average of around US$2.1/MMBtu in July compared to an average of around US$0.3/MMBtu in June 2023. The higher discount in the European gas market could help divert more LNG cargoes towards Asia and reduce the supply glut in the European market.