Gas prices in Europe have fallen below pre-war levels, putting pressure on vegetable oil prices

A very warm December and forecasts of positive temperatures in January in Europe increase the pressure on world prices for gas and, accordingly, for oil. According to the ISE exchange, at the TTF hub in the Netherlands, gas quotations for the week fell by another 10% to €83/MWh or $920/per 1,000 m ³.

European underground storages are 86% full with gas, and withdrawals are quite slow due to warm weather, which, against the background of stable supplies of liquefied natural gas, including from the United States, leads to lower prices.

February natural gas prices fell to a 10-month low on Friday, but then rose slightly amid a cold front in the US that increased heating demand and disrupted LNG production and exports. According to the weekly EIA report, for the first time in 11 months, natural gas reserves in the US exceeded the average 5-year level and amounted to 87 billion m³.

On Friday, Brent crude oil futures rose by 3.6% to $83.9/barrel (+5% for the week), returning to the level of the previous month due to frost in the USA and Russia’s announcement of a production cut of 0. 5-0.7 million barrels/day, presumably caused by a decrease in exports due to sanctions.

Citigroup experts believe that oil prices may fall to $65/barrel by the end of the year, and to $45/barrel in 2023 if the global economic recession worsens, which is becoming real amid news from China.

After China’s sudden abandonment of strict quarantine restrictions, the incidence of covid-19 reached 1 million cases/day, and this figure may double in the coming days. But despite the record outbreak of the disease, in the last 5 days not a single death due to the coronavirus was reported. Many citizens self-isolate to avoid getting sick, which reduces consumption. Some shops are closed, and there is not enough flu medicine. The spread of the pandemic could reduce demand for oil and agricultural products, which China imports in significant volumes.

March palm oil futures on Bursa Malaysia fell 1.69% to 3,893 ringgit/t or $880.37/t, losing 2.5% for the week and 4.3% for the fortnight.

The price pressure was increased by the Turkish agency TMO’s purchase of 24,000 tons of sunflower oil for delivery in January-February at a price of $1,214/t, while at the previous tender on July 5, TMO purchased 18,000 tons of sunflower oil at a price of $1,489.9/t EXW.

Tags: EU, prices, edible oils