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Commodities corner: Hit and OPEC

Events in the oil industry will – for the 4th week in a row – dominate commodity markets today and for much of the week with the EU price cap on Russian oil to be confirmed after OPEC+ decides on its production figures.

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In anticipation of this situation, Brent and West Texas Intermediate (WTI) crude futures closed with a loss on Friday ahead of Sunday’s OPEC+ meeting and the agreement on a price cap for Russian oil (which included Australia).

WTI crude oil for January delivery closed down $US1.24 to $US79.98 a barrel. February Brent crude, the global benchmark dropped by around $US1.30 to $US85.57.

OPEC+ met Sunday to set production quotas for its members, with sources suggesting the group will stick with its November decision to reduce quotas by two million barrels a day.

The price of both crude types has fallen by more than 13% in the past month and the early November increase in the production cut has so far failed to steady the price.

The meeting came a day ahead of the start of European sanctions on Monday on Russian oil exports and a price cap on the price of Russian oil that could remove supply from the market. European Union countries on Friday agreed to a US$60 price cap following prolonged negotiations.

And Friday also saw G7 nations and Australia add their agreement to a $US60 a barrel price cap on Russian seaborne crude oil Russia though has made it clear it won’t sell below that level.

The Financial Times reported at the weekend that Russia has spent more than $US16 billion buying dozens of old and ageing tankers to transport its crude and avoid sanctions and the price cap.

Commerzbank pointed out in a note that the 2 million barrel a day product cut from OPEC+ has not done much for prices and the Brent price is around its lows of late September which forced the group to make the cut.

One unknown going forward is the impact of the EU’s oil embargo on seaborne crude from Russia from today and the price cap. Both could have an immediate impact but more likely any lasting change will take months to emerge.

The price of the Russian Urals oil type is trading above this level, Commerzbank said.

The cap means British and EU companies will only be able to offer transport insurance or finance if the Russian oil price is below the $US60 cap, so Russia will have to finance the freight and the insurance, especially the insurance. That’s effectively what its tanker move, as reported by the FT, is designed to overcome.


The continuing easing of China’s Covid restrictions boosted interest in the metals markets on Friday.

Wednesday’s poor business activity surveys did not damage market sentiment as metal prices rallied to $US8,438 for copper and more than $US2,400 for aluminium.

In New York, Comex copper jumped more than 6% over the week to end at $3.855 a pound, the highest since the early November rally pushed the price to $US3.91 a pound.

Comex gold continued to rise and remained above $US1,800 an ounce level to close at $US1811.40 an ounce, a gain of more than 3% for the week.

This Friday’s Chinese trade data will be another test for commodity prices as will any more easing of the country’s Covid restrictions.

Iron ore prices rose around 8% for the week to end at $US106.05, the highest since early August for the benchmark 62% Fe fines delivered to northern China.

Australian coking coal edged up $US5 a tonne on the SGX market to $US270.33 a tonne on Friday.

Thermal coal rose 8% to end the week around $US385 a tonne on Friday.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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