What to Watch in Commodities: OPEC, Iron Ore, Gas, Trade, Storms

LAGOS (Capital Markets in Africa) – Commodity investors have a busy docket this week, with near-term headlines set to be dominated by the damage wrought by Hurricane Florence in the U.S. and its far-flung Asian cousin, Typhoon Mangkhut. There’s also likely be squalls for raw materials from the U.S.-China trade war, with metals including copper sinking on Monday on concern more levies may hit.

Beyond the bad weather, there’s a trio of a meeting that’ll command attention, with the most important in Algiers as the Organization of Petroleum Exporting Countries and allies led by Russia assess world markets, having agreed to boost supply at their last meeting in June. In China, iron ore miners will gauge prospects for demand as they convene with steelmakers who are paying the highest prices in 12 months for high-grade material. And in Barcelona, the biggest names in the global gas industry weigh the outlook.

Barreling On
Oil traders will be focused on Algiers, where a coalition of producers spearheaded by OPEC and Russia meet on Saturday and Sunday to consider their next step. Although they’ve agreed to increase production to keep prices in check, the outlook is growing increasingly uncertain. On the one hand, Brent futures are near $80 a barrel on supply losses in Venezuela and Iran, showing the need for Saudi Arabia and Russia to pump more. On the other hand, the threat to demand in emerging markets may lead them to hold steady.

They’ll also discuss terms of turning this ad-hoc alliance into something more permanent, while OPEC nation Iran will continue to protest its fellow members taking the market-share it’s losing because of U.S. sanctions. The event will also see the launch of OPEC’s long-term report, the World Oil Outlook.

Major Miners
The big four of the global iron ore market — Vale SA, BHP Billiton Ltd., Rio Tinto Group and Fortescue Metals Group Ltd. — will update investors this week on the outlook for supply and demand at a major conference in China. The two-day event, which kicks off in Dalian on Thursday, is hosted by country’s main steel grouping and comes at a time of upheaval for the national industry as mills grapple with a concerted state-led drive to fight pollution.

That push has boosted demand for the top-grades of iron ore, buttressing prices just as other raw materials have felt the heat from the U.S.-China trade fight. The gathering will shine a spotlight on how severe mill curbs will be this winter in the country that accounts for half of global steel supply. Iron ore investors will also be on the watch for further market commentary from BHP as the world’s largest miner issues its annual report on Tuesday.

Cold Shoulder
The Gastech conference will bring the top natural gas producers to Barcelona this week at a time they are jockeying for position in a changing market. Competition to supply Europe is intensifying as Russia and Norway deliver record volumes, while President Donald Trump insists the region is poised to become a “massive buyer” of pricier American liquefied natural gas.

The push into Europe comes as China, the fastest growing importer of LNG, appears to be turning its back on U.S. supplies. Importers may suspend buying as the country threatens heavy tariffs amid the escalating trade war, even as demand in North Asia rises ahead of winter.

Tallying the Cost
It’s clean-up and damage-assessment time in the Carolinas after Hurricane Florence battered its way through the region at the weekend, bringing record flooding. The Atlantic season’s first hurricane killed at least 15 people, washed partially treated sewage into waterways, and left entire communities under water. In some areas, rainfall reached 40 inches, or about 1 meter.

In raw materials, the focus is on the fall-out for crops such as cotton; damage to coal-ash landfills, including a facility run by Duke Energy Corp.; and disruption faced by the hog industry. Hog futures rose for three days through Friday, when the storm made landfall. They’ve surged in the past month, with gains also underpinned by concerns over African swine fever in China.

Rice Risk
Asia’s been whacked by extreme weather too, with the full consequences to become clear in the coming days. Super Typhoon Mangkhut hurtled through swathes of farmland in the Philippines at the weekend, then roughed up Hong Kong and thumped mainland China.

The Philippines — which gets hit by an average of 20 storms a year — is already grappling with the fastest inflation in the region, and damage to rice farms may stoke the pace of price gains. An initial estimate tallied losses at about 250,000 tons of rice, with 175,301 hectares affected. The country ranks among the top-10 biggest importers of the staple.

Bulls and Bears
Sugar just capped the best weekly gain since 2016 and market players are expecting the good times to keep rolling. About 71 percent of traders and analysts surveyed by Bloomberg are bullish, the most since December, as dry weather in Brazil and key producing areas in Europe threatens to hurt output.

In the soybean market, traders and analysts are growing increasingly bearish after the U.S. government boosted its estimate on the domestic production and stockpiles. In the gold market, sentiment turned positive. Terminal subscribers can see the other commodity surveys here.

Source: Bloomberg Business News