The relentless rise of gold prices is in focus this week in S&P Global Platts editors’ roundup of energy and raw materials trends. Plus, freight rates react to Brent’s slight recovery, coal generation in Germany fizzles out, and more.
1. Gold keeps smashing records on COVID fears, global debt
What’s happening? Gold pushed higher July 27 early in the European trading day, and took down the previous all-time high of $1,921/oz. Safe-haven buying has continued to spur the metal higher, boosted by a weaker US dollar, continued uncertainty regarding the US’s response to COVID-19, the probability of another multi-trillion US economic stimulus package, and the colossal global debt stimulated by central banks and governments worldwide.
What’s next? With the above factors likely now to be priced in, momentum may decrease with the yellow metal susceptible to short-term pullbacks. However, with rising inflation expectations as well as unprecedented fiscal stimuli and increasing government debt, many investment banking and financial services have increased their gold price forecasts for Q4 2020 as well as 2021. The elusive $2,000/oz mark may potentially materialise sooner than later.
2. Freight rates start to slump as oil rebounds
What’s happening? Tanker freight rates nosedived after experiencing a floating storage bonanza in April which saw rates for VLCCs on a WAF-East voyage near record-highs of over $70/mt in early April. A pick up in crude demand has seen Dated Brent prices recover from the April lows, but on the sea, this has served to worsen floating storage economics.
What’s next? According to S&P Global Platts Analytics, freight rates on the dirty tankers market will likely remain under pressure until OPEC+ cuts are reversed. OPEC and its allies aim to ease its 9.7 million b/d production cut to 7.7 million b/d in August, but even then, it remains to be seen how the improved production profile translates into seaborne exports.
3. China fuel inventory mounts after floods hit domestic demand
What’s happening? Since June, 23 provinces in China and Chongqing municipality have been suffering from heavy rains and floods. As a result, the regions’ transportation, construction and broader industrial activities came to a grinding halt, putting the brakes on domestic fuel demand recovery. Despite the setback, Chinese refineries have been maintaining high run rates in order to digest record-high crude imports, prompting oil product inventory to surge.
What next? The glut of fuel inventory has put a lot of pressure on China’s major exporters to actively seek overseas outlets to clear their excess supplies at home. China is expected to export 1.3 million-1.5 million mt of gasoline in August, while gasoil exports could possibly hit 2 million mt. In comparison, China exported only 676,000 mt of gasoline and 1.45 million mt of gasoil in…
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