Five Key Charts to Watch in Global Commodities This Week

Diesel and natural gas markets in Europe are showing increased fragility, while crop conditions in the US are worsening as dry weather hampers growing in key areas. Here are five charts to consider in global commodities markets this week.

(Bloomberg) — Diesel and natural gas markets in Europe are showing increased fragility, while crop conditions in the US are worsening as dry weather hampers growing in key areas. Here are five charts to consider in global commodities markets this week.

Diesel

A key measure of the European diesel market’s health is signaling a deepening supply crunch, just when demand usually sees a lull before ramping up again ahead of winter. The diesel prompt spread — the difference between its two nearest futures contracts — has spiked this month as refinery outages tighten stockpiles. The surging premium shows that traders are paying more now to secure inventories, highlighting the vulnerability of the market after the loss of Russian product.

Corn

Crop conditions in the US, the world’s largest corn producer, are deteriorating as dry weather spreads across key growing areas. Corn crops experiencing moderate to intense drought have increased to 64% of the total, jumping 39 percentage points in the past five weeks. That compares with just 19% for the same week a year ago. Market watchers will get a fresh sense of the state of the Corn Belt with the release of crop conditions on Monday and the weekly drought report on Thursday. The most recent report showed the situation worsened more than anticipated as a lack of rain stressed young plants. Still, amid the darkening outlook, heavy profit-taking pushed corn for December delivery to fall 1.6% last week in Chicago after a recent surge had technical indicators suggesting the runup went too far, too fast. Corn futures were higher in Monday trading.

European Natural Gas

Benchmark natural gas prices in Europe have seen renewed volatility this month as a result of outages and unusually hot weather, with large daily swings replacing the modest moves that characterized trading for the better part of this year. That instability has left futures stuck between two key moving averages — the 50-day and 100-day measures — a trend last seen in late 2022 during the heating season. However, this time the channel is narrowing, suggesting further fluctuations ahead as supply concerns gather steam for the fragile market. Futures surged on Monday after a short-lived rebellion in Russia added to those worries.

LNG

Sellers of US liquefied natural gas cargoes to Asia have seen their profits disrupted due to the volatility in Europe. That’s a change from May, when traders were reaping stable revenue from diverting gas shipments to the region with Japan-Korea Marker benchmark prices trading above the European benchmark. That spread has since narrowed this month, meaning fewer shipments may end up in Asia. In fact, a reversal in the price gap in the first half of this month prompted traders to send more cargoes to Europe instead.

Oil

OPEC+’s surprise voluntary output cuts are set to push the oil market into a deficit to slightly more than 2 million barrels a day in the fourth quarter, according to Bloomberg Intelligence. Such a substantial shortfall implies a significant depletion of inventories, potentially providing a more constructive backdrop for oil prices. West Texas Intermediate futures and Brent futures are both down about 13% this year amid a slower-than-expected recovery in demand following the global pandemic, particularly in China, and ongoing concerns of recession. If a significant undersupply unfolds, as the BI scenario suggests, pressure may mount on OPEC+ to bring more barrels back into the market.

–With assistance from Ann Koh, Rachel Graham, Michael Hirtzer, Kristy Scheuble and Rachel Morison.

(Updates prices throughout with Monday trading.)

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