Commodities
Gold’s run to record high may crimp demand: Russell
By Clyde Russell
LAUNCESTON, Australia (Reuters) -Gold has been the standout commodity performer so far this year, gaining 18.5% and posting a record high.
But the precious metal may become a victim of its own success, with consumer buying at risk from the surge in prices.
ended at $2,443.29 an ounce on Aug. 2, and it has largely held onto the gains made this year, which saw a sustained rally to an all-time high of $2,483.60 on July 17.
The World Gold Council released its quarterly report last week and the industry group reported total demand of 1,258.2 metric tons in the second quarter, the highest on record for a second quarter and some 4% above the same period in 2023.
But the breakdown of the demand figures shows some trends that may point to a slowdown in coming quarters.
The biggest gain in demand was from what the Council called the Over The Counter (OTC) market, which largely means buying from institutional investors, high net-worth individuals and family offices.
OTC demand was 329.2 tons in the second quarter, up 53% from the same quarter in 2023 and a massive jump of 385% from the first quarter.
The Council attributed the surge in OTC appetite to “portfolio diversification,” which leads to the question as to how sustainable this demand is, given that once these investors have reached the point where they feel they have sufficient gold in their asset mix, they will likely ease back on purchases.
The report also showed a strong decline in jewellery consumption, which dropped to 390.6 tons in the second quarter, down 19% from the same period in 2023.
Joining jewellery in the losing column was official coins, where demand dropped 38% to 52.7 tons in the second quarter.
Both of these signal that consumers may be starting to pull back on purchases because of the strong gain in prices.
CHINA, INDIA
Of particular concern is jewellery demand in China and India, the two largest buyers of physical gold, which together account for almost half the market.
China saw jewellery demand slump 35% in the second quarter to 86.3 tons, while India recorded a 17% fall to 106.5 tons, according to the Council report.
A further sign that China’s appetite for gold may be waning somewhat was the 18% drop in net imports via Hong Kong in June, with official data showing imports of 21.92 tons, down from 26.72 tons in May.
China doesn’t disclose gold import volumes, making the Hong Kong data a key proxy for demand in the world’s top consumer.
India’s consumer demand is likely to get a boost in the current quarter after the government cut the import duty to 6% from 15%, but this is also likely to prove to be a one-time sugar hit to demand, rather than a sustainable shift to higher demand.
Higher prices also likely weighed on flows into Exchange Traded Funds (ETFs), with the Council figures showing a net drop of 7.2 tons in the second quarter, which followed a decline of 113 tons in the first.
Central bank buying also eased in the second quarter, coming in at 183.4 tons, down from the 299.9 tons in the first, although up 6% from the 173.6 tons in the second quarter of 2023.
Overall, there are enough factors to suggest that the rise to a record high for gold is starting to crimp some of the more price-sensitive demand.
But it’s not all bad news, with investor interest likely to be maintained by the ongoing expectation that monetary policy in several key countries is likely to be eased, with a particular focus on likely interest rate cuts by the U.S. Federal Reserve.
High geopolitical tensions, with ongoing conflict in the Middle East and Ukraine, as well as political risk surrounding what is shaping to be a tight U.S. presidential election are also likely to keep interest in gold high.
The combination of bearish and bullish factors for the yellow metal may end up having the effect of keeping the price in a relatively narrow range for the rest of the year.
The opinions expressed here are those of the author, a columnist for Reuters.
MOSCOW (Reuters) – Nearly 500,000 metric tons of Russian oil products are trapped on tankers hit by U.S. sanctions, LSEG data showed on Wednesday.
On Jan. 10, new Russia-related sanctions targeted more than 180 vessels and insurance companies, adding to the impact of similar restrictions imposed by United Kingdom (TADAWUL:) and Europe Union.
The vessels under the latest U.S. sanctions include nine tankers that loaded oil products at Russian Baltic and Black Sea ports in December and January.
Four of them – Cup, Aquatica, Turaco and Onyx – are carrying in total around 280,000 tons of fuel oil, destined for India, Turkey and Singapore, LSEG data shows.
Another of the tankers – Ariadne – was loaded in December with about 35,000 tons of naphtha in the Russian Baltic port of Ust-Luga. It is drifting near Egyptian port of Port Said, according to shipping data.
Four other vessels from the sanctions list are carrying in total around 160,000 tons of ultra-low sulphur diesel and gasoil of Russian origin.
One of those cargoes – Pravasi – is discharging at the Brazilian port of Santos. Three other vessels – Symphony, Jupiter and Talisman – are on their way to Turkey, according to LSEG data.
Although there is a transition period, allowing the discharge of cargoes that has already been agreed, traders said concern about penalties has slowed activity.
Since the sanctions were announced, at least 65 oil tankers have dropped anchor at multiple locations, including off the coasts of China and Russia, ship tracking data showed.
By Arunima Kumar
(Reuters) -Oil prices paused their rally on Tuesday, but remained near four-month highs, with the market’s attention focused on the impact of new U.S. sanctions on Russian oil exports to key buyers India and China.
futures slipped 54 cents, or 0.67%, to $80.47 a barrel by 1033 GMT, while U.S. West Texas Intermediate (WTI) crude fell 53 cents, or 0.67% to $78.29 a barrel.
Prices jumped 2% on Monday after the U.S. Treasury Department on Friday imposed sanctions on Gazprom (MCX:) Neft and Surgutneftegas as well as 183 vessels that transport oil as part of Russia’s so-called “shadow fleet” of tankers.
“With several nations seeking alternative fuel supplies in order to adapt to the sanctions, there may be more advances in store, even if prices correct a bit lower should tomorrow’s U.S. CPI data come in somewhat hotter-than-expected”, said Charalampos Pissouros, senior investment analyst at brokerage XM.
The U.S. producer price index (PPI) will be released today, followed by the consumer price index (CPI) on Wednesday.
A core inflation rise above the 0.2% forecast could lower the likelihood of further Federal Reserve rate cuts, which typically support economic growth and could boost oil demand. [MKTS/GLOB]
While analysts were still expecting a significant price impact on Russian oil supplies from the fresh sanctions, their effect on the physical market could be less pronounced than what the affected volumes might suggest.
ING analysts estimated the new sanctions had the potential to erase the entire 700,000 barrel-per-day surplus they had forecast for this year, but said the real impact could be lower.
“The actual reduction in flows will likely be less, as Russia and buyers find ways around these sanctions,” they said in a note.
Nevertheless, analysts expect less of an supply overhang in the market as a result.
“We anticipate that the latest round of sanctions are more likely to move the market closer to balance this year, with less pressure on demand growth to achieve this,” said Panmure Liberum analyst Ashley Kelty.
Uncertainty about demand from major buyer China could blunt the impact of the tighter supply. China’s imports fell in 2024 for the first time in two decades outside of the COVID-19 pandemic, official data showed on Monday.
By Arathy Somasekhar
HOUSTON (Reuters) – Peru’s niche Bretaña is gaining popularity in the United States, with the first cargo discharging in the U.S. Gulf Coast this month as U.S. refiners seek alternatives for declining Mexican heavy crude.
Bretaña, a rare heavy sweet crude with minimal metals, is produced in the Peruvian side of the Amazon (NASDAQ:) rainforest. It is then barged along the Amazon river and loaded onto larger ships that depart from Brazil.
The vessel Radiant Pride transported about 300,000 barrels of Bretaña from Manaus, on the banks of the Negro river in Brazil, and discharged on Jan. 2 in Houston, ship tracking data from Kpler and LSEG showed.
The cargo was bought by oil major Shell (LON:), a source said. Shell declined to comment.
“Given the drop in heavy sour crude from Mexico to the U.S. Gulf Coast over the last year, we are starting to see new heavy grades being pulled in to backfill this loss – this is a trend we only expect to continue,” said Matt Smith, an analyst at Kpler.
U.S. imports from Mexico fell to their lowest on record in 2024 as the Latin American country’s oil production fell and a larger portion of output remained at home to be refined.
Two cargoes of Peru’s Bretaña, a relatively new entrant into the market since production began in 2018, discharged at the U.S. West Coast last year – one at Marathon Petroleum (NYSE:) and another at PBF Energy (NYSE:) terminals, the Kpler data showed.
Marathon Petroleum declined to comment. PBF Energy did not immediately reply to a request for comment.
PetroTal Corp, the producer of Block 95 where the Bretaña oilfield is located, bought the assets from Canadian producer Gran Tierra Energy (NYSE:) in 2017, and currently produces about 20,000 barrels of oil per day, according to Chief Executive Officer Manuel Zúñiga.
Challenges with transporting the crude via a pipeline operated by Peru’s state oil firm Petroperu led to a brief halt in exports between 2022 and 2024, Zúñiga said.
Petroperu has struggled in recent years to keep the line operational amid spills and social conflict interrupting its flow.
Three cargoes of Bretaña headed to the U.S. West Coast and one to the U.S. East Coast between 2020 and 2022, Kpler data showed.
About 90% of the Bretaña crude produced by PetroTal is exported, and the remaining is transported by barges to Petroperu’s refinery in Iquitos, Zúñiga said.
PetroTal has a contract with Houston-based Novum Energy under which Novum buys the crude for export and arranges its transportation, Zúñiga added.
Novum did not immediately respond to a request for comment.
While PetroTal hopes to increase production, permitting delays as well as reliance on barges are a current limitation, Zúñiga said.
“You need access to the pipeline,” Zúñiga said, adding that the company is working to secure use of the infrastructure.
Petroperu said last year that it would hold negotiations with producers in the Peruvian jungle so that they can use the pipeline with a fair rate to help cover operational costs.
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