(Bloomberg) -- There’s a lot of red in commodity markets as the holiday season ramps up: Oil is in the midst of a two-month losing streak, prices for key battery metals keep falling and outflows are mounting for bullion-backed exchange-traded funds. Meanwhile, stuck-in-the-mud spuds — the darling of Christmas dinners — are seeing a jump in costs amid terrible weather in Europe. In the US, Congress is getting serious about cracking down on cheap imports of enriched uranium from Russia.
Here are five notable charts to consider in global commodity markets this week.
Weakness abounds for oil, which is trading near a five-month low. Not only have West Texas Intermediate futures fallen for seven weeks, but the prompt spread has suffered a sharp retreat since surging in September as Saudi Arabia and Russia extended their production cuts and concerns mounted over tightening global supplies. Since then, inventories have ballooned, demand growth has cooled and markets have turned skeptical over the prospects for the Organization of Petroleum Exporting Countries and its allies to implement further pledged cuts. The US oil benchmark is set to end the year in contango, a bearish market structure that signals oversupply where barrels for prompt delivery are cheaper than future ones. Traders will be eyeing monthly reports later in the week from OPEC and the International Energy Agency for supply-demand clues, while the US Energy Information Administration publishes its Short-Term Energy Outlook on Tuesday.
US lawmakers are ramping up efforts to halt imports of Russian enriched uranium. The House of Representatives is slated to consider legislation this week that would bar it. At the same time, a measure requiring the US to boost its purchases of domestic nuclear reactor fuel was added to a compromise version of the $886 billion must-pass defense legislation. Russia supplied almost a quarter of the enriched uranium used to fuel America’s fleet of more than 90 commercial reactors last year, making it the No. 1 foreign supplier, according to Energy Department data.
Gold may be fresh off a record high, but a hotter-than-expected US jobs report diminished hopes for looser monetary policy next year, sending the non-interest bearing precious metal lower and below $2,000 an ounce. At the same time, global holdings in bullion-backed ETFs are continuing to slide, with November marking a sixth straight month of outflows. The reluctance to go long gold may be the result of ETF investors waiting for the Federal Reserve to actually start pulling back rates. Swaps markets, which started last week pricing in a 60% chance of a Fed cut at its March meeting, ended the week around 45% with the probability dropping even further on Monday.
Raw material costs for batteries have plunged this year. Lithium carbonate prices in China are down more than 80% since hitting a record in November 2022, a dramatic change of fortune for a key ingredient of batteries that power the world’s electric vehicles. Lithium hydroxide, cobalt and nickel prices also have tumbled. As such, BloombergNEF expects battery prices to continue to drop in the coming years as a result of capacity expansion across the product value chain and lower-than-expected demand growth.
Prices for potatoes — a staple for festive season roasts — are soaring thanks to heavy rains that have sidelined tractors in waterlogged fields, delaying harvests and risking supply shortages. Although thinly traded, European processing potato futures are above 30 euros per 100 kilogram bag and are at the highest seasonal level in at least 14 years. Prices also spiked in May due to intense wet weather, providing yet another example of a growing number of crops affected by climate change.
--With assistance from Celia Bergin.
(Updates with details of oil market reports in third paragraph, swaps pricing in fifth paragraph.)
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