The increased talks for peace in Gaza led crude oil prices to a fall on Monday as Israel reduced the number of troops it had in the fighting with Hamas.

US benchmark, West Texas Intermediate crude finished down 48 cents or 0.6% at $86.43 a barrel on the New York Mercantile Exchange.

Brent crude, considered the global benchmark recorded a 79 cent or 0.9% fall to $90.38 a barrel on ICE Futures Europe.

It was the first fall in prices in five sessions for Brent crude and the first in seven sessions for WTI.

May natural gas rose 6 cents to $1.84 per 1,000 cubic feet.

A majority of Oklahoma energy stocks recorded gains in Monday’s day of trading with a 5% jump for Empire Petroleum Corp.

Canoo EV maker saw a more than 13% gain.

Other energy stocks were down for the day, according to the Texas Energy Report.

U.S. oil producers are not in a rush to significantly boost production despite oil prices hovering at a six-month high, as multi-year low natural gas prices are holding back drilling in parts of the Permian and costs have increased, analysts and industry executives tell Reuters.

Last week, WTI crude prices hit their highest level of the year so far, and the highest since the middle of October 2023, amid geopolitical flare-ups in the Middle East and signs of tightening oil markets.

But producers in America, where part of the natural gas is associated gas from oil drilling, are not jumping the gun. They are mindful of the investor demands for higher returns, not necessarily higher production.

“Natural gas is currently pricing at or below costs of production,” an executive at an exploration and production company said in comments in the latest quarterly Dallas Fed Energy Survey released at the end of March. 

Moreover, the same survey showed that breakeven prices for all oil-producing basins, including the Permian, have increased over the past year. Breakeven prices for companies to profitably drill a new well in the Permian now average $65 per barrel, which is $4 higher than last year, the survey showed. Almost all firms in the survey can profitably drill a new well at current prices, Dallas Fed says.

Nevertheless, producers are cautious.

“We need gas prices to get to $2.50 for an overall increase in activity. The Permian customers that have associated gas are seeing awful differentials,” Mark Marmo, CEO of oilfield firm Deep Well Services, told Reuters.

For context, the U.S. natural gas benchmark, Henry Hub, has been depressed below $2.00 per million British thermal units (MMBtu) since early February, due to weak winter demand amid milder weather, record output at the end of 2023, and higher-than-average natural gas stocks. 

Since March, the spot natural gas prices at the Waha hub in West Texas, in the Permian, have turned negative several times, sinking to as low as -$1.16 per MMBtu on March 18, per EIA data.

By Charles Kennedy for Oilprice.com

More Top Reads From Oilprice.com:

• Gold price consolidates near $2,350, as traders await strong catalysts. 
• Gold price cheers surge in central banks’ buying despite fading June Fed rate cut bets.
• Gold price correction is long due amid extremely overbought RSI, ahead of US CPI data.

Gold price is holding the fort near $2,350 early Tuesday, having witnessed good two-way businesses on Monday. Gold price now awaits key US fundamental data for a fresh directional move. In the absence of any top-tier US economic data later on Tuesday, the focus will remain on the speeches from the US Federal Reserve (Fed) policymakers.

Gold price hangs near record highs, correction in the offing?

Gold price has entered a phase of upside consolidation in the Asian session on Tuesday, as the US Dollar licks its wounds while the US Treasury bond yields hold their corrective downside amid a negative shift in risk sentiment.

Asian stock markets pare early gains, led by the decline in Chinese indices even as markets stay hopeful of a worldwide manufacturing rebound. Markets are trading more cautiously, as nervousness sets in ahead of Wednesday’s all-important US Consumer Price Index (CPI) data release. The US inflation data will affirm the recent pullback in the market expectations of a likely rate cut by the Fed in June.

Strong US Nonfarm Payrolls data and hawkish Fed commentaries have weighed on the Fed rate cut bets, with markets now pricing in a roughly 50% chance of another hold in June. The hawkish shift in the market expectations has underpinned the recent upsurge in the US Treasury bond yields.

Early Asia,  Minneapolis Fed President Neel Kashkari (2024 non-voter) said that “the inflation rate is running around 3% and the Fed has to get back down to 2%, adding that “the bank cannot ‘stop short’ on the inflation fight.”

However, Gold price continues to show resilience to rising US Treasury bond yields and easing geopolitical tensions in the Middle East, in the wake of a Gold buying spree by global central banks, especially by the People’s Bank of China (PBOC).

 A Chinese official reported on Sunday, the Chinese central bank purchased Gold for its reserves for the 17th straight month in March. Bullion held by the PBOC rose to 72.74 million fine troy ounces last month, the official said. Turkey, India, Kazakhstan and some eastern European countries have also been buying gold this year, per Reuters.

Renewed central bank demand for the bright metal sent the Gold price to another record high above $2,350 on Monday, extending its record-setting rally.

Looking ahead, Gold traders will take account of Fedspeak amid a lack of top-tier US economic data. Meanwhile, position adjustment and profit-taking in Gold price cannot be ruled out, as traders gear up for key US inflation report due on Wednesday.

Gold price technical analysis: Daily chart

A further upside in Gold price appears elusive, as the extremely overbought 14-day Relative Strength Index (RSI) conditions continue to threaten a correction.

If Gold buyers give up, a correction toward the previous record high of $2,331 will be in the offing.

The extension of the Gold price pullback could test the April 4 high at $2,305, below which the April 5 low of $2,268 will be tested.

However, if Gold buyers retain control, the all-time high at $2,354 will be the first resistance to scale.

A fresh rally toward the $2,370 round figure will be seen only on acceptance above the $2,350 psychological level.

 

• Gold price consolidates near $2,350, as traders await strong catalysts. 
• Gold price cheers surge in central banks’ buying despite fading June Fed rate cut bets.
• Gold price correction is long due amid extremely overbought RSI, ahead of US CPI data.

Gold price is holding the fort near $2,350 early Tuesday, having witnessed good two-way businesses on Monday. Gold price now awaits key US fundamental data for a fresh directional move. In the absence of any top-tier US economic data later on Tuesday, the focus will remain on the speeches from the US Federal Reserve (Fed) policymakers.

Gold price hangs near record highs, correction in the offing?

Gold price has entered a phase of upside consolidation in the Asian session on Tuesday, as the US Dollar licks its wounds while the US Treasury bond yields hold their corrective downside amid a negative shift in risk sentiment.

Asian stock markets pare early gains, led by the decline in Chinese indices even as markets stay hopeful of a worldwide manufacturing rebound. Markets are trading more cautiously, as nervousness sets in ahead of Wednesday’s all-important US Consumer Price Index (CPI) data release. The US inflation data will affirm the recent pullback in the market expectations of a likely rate cut by the Fed in June.

Strong US Nonfarm Payrolls data and hawkish Fed commentaries have weighed on the Fed rate cut bets, with markets now pricing in a roughly 50% chance of another hold in June. The hawkish shift in the market expectations has underpinned the recent upsurge in the US Treasury bond yields.

Early Asia,  Minneapolis Fed President Neel Kashkari (2024 non-voter) said that “the inflation rate is running around 3% and the Fed has to get back down to 2%, adding that “the bank cannot ‘stop short’ on the inflation fight.”

However, Gold price continues to show resilience to rising US Treasury bond yields and easing geopolitical tensions in the Middle East, in the wake of a Gold buying spree by global central banks, especially by the People’s Bank of China (PBOC).

 A Chinese official reported on Sunday, the Chinese central bank purchased Gold for its reserves for the 17th straight month in March. Bullion held by the PBOC rose to 72.74 million fine troy ounces last month, the official said. Turkey, India, Kazakhstan and some eastern European countries have also been buying gold this year, per Reuters.

Renewed central bank demand for the bright metal sent the Gold price to another record high above $2,350 on Monday, extending its record-setting rally.

Looking ahead, Gold traders will take account of Fedspeak amid a lack of top-tier US economic data. Meanwhile, position adjustment and profit-taking in Gold price cannot be ruled out, as traders gear up for key US inflation report due on Wednesday.

Gold price technical analysis: Daily chart

A further upside in Gold price appears elusive, as the extremely overbought 14-day Relative Strength Index (RSI) conditions continue to threaten a correction.

If Gold buyers give up, a correction toward the previous record high of $2,331 will be in the offing.

The extension of the Gold price pullback could test the April 4 high at $2,305, below which the April 5 low of $2,268 will be tested.

However, if Gold buyers retain control, the all-time high at $2,354 will be the first resistance to scale.

A fresh rally toward the $2,370 round figure will be seen only on acceptance above the $2,350 psychological level.

 

Brazilian oil and gas company Enauta may soon change the face of Latin American fossil fuels by establishing an independent oil and gas company with 3R Petroleum Óleo e Gás. This is the most recent of several ambitious moves by Enauta to expand its oil and gas operations in Brazil. In recent months, the firm has signed several contracts to acquire stakes in multiple offshore oilfields in the region, thereby boosting its production capacity. The proposal to merge with 3R, if accepted, could lead to the establishment of a major new independent company in the region. 

The Brazilian oil firm 3R Petroleum Óleo e Gás announced it has temporarily halted talks with PetroReconcavo, over a proposed merger, opening the door for an alternative deal. Enauta proposed a new merger offer to 3R, which could lead to the creation of “one of the most diversified independent oil and gas companies in Latin America,” if accepted. If the merger goes ahead, the independent company will have a production capacity of over 100,000 bpd. The growing interest in 3R led its stocks to rise by 7.3 percent following the announcement. 

This move by Enauta follows a growing ‘megamerger’ trend being seen worldwide. In the U.S., both Chevron and Exxon announced a major new deal in October, with Occidental following in December, and Diamondback in February. Meanwhile, small oil and gas companies in Brazil have been looking to consolidate operations following a widespread buy-up of assets formerly owned by state-owned Petrobras. 

Enauta presented 3R with an all-stock offer. The deal would mean 3R shareholders hold 53 percent of the company, while Enauta shareholders would hold 47 percent. This is expected to provide a “balanced, five-year high organic growth portfolio with ability to add value in an environment of consolidation and resilience to commodity pricing cycles,” according to Enauta. The firm’s board of directors unanimously approved the proposal, believing the new independent company could attain a strategic positioning in domestic and international capital and banking markets. The firm believes that its deal is superior to that of PetroReconcavo in terms of “strategic positioning, governance, tangible synergies and from a risk management perspective.” 

Enauta explained, “The transaction will lead to state-of-the-art governance, with diversified reference shareholders, a predominantly independent board of directors with an experienced executive team. There will be growth opportunities in offshore and onshore operations, mitigating operational, geological and regulatory risks, complementarity in teams, talent attraction and retention and strong adherence to ESG principles.” 

This is just one of many moves by Enauta to expand its operations in recent months. In December the firm signed a deal with Petrobras to purchase two offshore oil and gas fields – Uruguá and Tambaú – in the Santos Basin, as well as natural gas pipeline infrastructure. This is expected to cost Enauta $10 million, with a potential $25 million more for oilfield development. 

That same month, Enauta signed a contract with QatarEnergy Brasil to acquire a stake in the Campos Basin oilfields. The company expected to acquire the whole 23 percent stake previously held by QatarEnergy in the Abalone, Ostra and Argonauta oilfields, which comprise the Parque das Conchas. The zone is operated by Shell, which has a 50 percent equity stake. Production stands at around 35,000 bpd from 25 wells connected to the FPSO Espírito Santo platform. This is expected to cost Enauta a total of $150 million. 

In March, Enauta also signed a deal with Houston-based Westlawn Americas Offshore (WAO) to purchase a 20 precent participating interest in the BS-4 concession for $301.7 million. Enauta released a statementsaying, “Partnerships are important drivers for value generation and risk-sharing in the development of megaprojects such as Atlanta and Oliva. Since Atlanta’s Phase I investment was sanctioned in March 2022, Enauta has been approached by several potential partners interested in joining the project… The signing of a 20 percent minority stake with WAO is aligned with principles of Enauta’s value generation strategy, capital allocation efficiency and management of a balanced high growth, high risk-adjusted return oil and gas portfolio.”

Enauta has been rapidly building up its oil and gas portfolio in Brazil’s offshore region, with the purchase of stakes in several oilfields. This will help boost production in the coming years and allow it to grow as an independent oil and gas company. This could be enhanced further by a potential merger with 3R Petroleum Óleo e Gás, if accepted, which would lead to the creation of a major Latin American independent with high production output and a significant stake in the Brazil region. 

By Felicity Bradstock for Oilprice.com 

More Top Reads From Oilprice.com:

XAU/USD Current price: $2,329.91

• The US Dollar trades with a weaker tone amid a better market mood.
• Central banks’ decisions and US inflation take centre stage this week.
• XAU/USD corrected from a fresh record high, maintains the bullish tone.

Spot Gold keeps reaching record highs on a daily basis, hitting 2,353.64 a troy ounce on Monday. XAU/USD retreated from its Asian peak and currently trades below the $2,330 threshold as a better market mood undermines demand for the bright metal.

Meanwhile, the US Dollar trades with a weaker tone against most major rivals, although volatility is limited amid upcoming first-tier news. Next Wednesday, the United States (US) will release the March Consumer Price Index (CPI), while on Thursday, the European Central Bank (ECB) will announce its decision on monetary policy. In between, the Bank of Canada (BoC) and the Reserve Bank of New Zealand (RBNZ) will also announce their decisions on monetary policy.

Stock markets trade in positive territory, although gains remain modest amid caution ahead of critical events that may set the tone for the rest of the month. Finally, it is worth adding that the odds for a Federal Reserve (Fed) June rate cut keep decreasing, and major analysts now see July as the date for the first move. Upcoming inflation data will surely be a make-it-or-break for the USD.

XAU/USD short-term technical outlook

XAU/USD’s bullish trend is evident in the daily chart, which shows the pair consistently developing above all its moving averages. The 20 Simple Moving Average (SMA) has been steadily increasing but stands far below the current level and above the longer ones, showing a clear uptrend. Meanwhile, technical indicators are partially losing their bullish strength but still developing in extremely overbought territory. The Relative Strength Index (RSI) indicator has been doing so since March 27, anticipating a potential corrective slide or at least a consolidative stage.

The near-term picture is also bullish. The 4-hour chart shows all moving averages heading firmly north below the current level. Furthermore, the RSI indicator has corrected extreme overbought readings but turned flat at around 64, reflecting limited selling interest and far from signaling an upcoming reversal. Finally, the Momentum indicator has picked up within positive levels, in line with the dominant trend.

 Support levels: 2,318.60 2,303.80 2,287.30

Resistance levels: 2,337.70 2,353.65 2,370.00

XAU/USD Current price: $2,329.91

• The US Dollar trades with a weaker tone amid a better market mood.
• Central banks’ decisions and US inflation take centre stage this week.
• XAU/USD corrected from a fresh record high, maintains the bullish tone.

Spot Gold keeps reaching record highs on a daily basis, hitting 2,353.64 a troy ounce on Monday. XAU/USD retreated from its Asian peak and currently trades below the $2,330 threshold as a better market mood undermines demand for the bright metal.

Meanwhile, the US Dollar trades with a weaker tone against most major rivals, although volatility is limited amid upcoming first-tier news. Next Wednesday, the United States (US) will release the March Consumer Price Index (CPI), while on Thursday, the European Central Bank (ECB) will announce its decision on monetary policy. In between, the Bank of Canada (BoC) and the Reserve Bank of New Zealand (RBNZ) will also announce their decisions on monetary policy.

Stock markets trade in positive territory, although gains remain modest amid caution ahead of critical events that may set the tone for the rest of the month. Finally, it is worth adding that the odds for a Federal Reserve (Fed) June rate cut keep decreasing, and major analysts now see July as the date for the first move. Upcoming inflation data will surely be a make-it-or-break for the USD.

XAU/USD short-term technical outlook

XAU/USD’s bullish trend is evident in the daily chart, which shows the pair consistently developing above all its moving averages. The 20 Simple Moving Average (SMA) has been steadily increasing but stands far below the current level and above the longer ones, showing a clear uptrend. Meanwhile, technical indicators are partially losing their bullish strength but still developing in extremely overbought territory. The Relative Strength Index (RSI) indicator has been doing so since March 27, anticipating a potential corrective slide or at least a consolidative stage.

The near-term picture is also bullish. The 4-hour chart shows all moving averages heading firmly north below the current level. Furthermore, the RSI indicator has corrected extreme overbought readings but turned flat at around 64, reflecting limited selling interest and far from signaling an upcoming reversal. Finally, the Momentum indicator has picked up within positive levels, in line with the dominant trend.

 Support levels: 2,318.60 2,303.80 2,287.30

Resistance levels: 2,337.70 2,353.65 2,370.00

ChiniMandi, Mumbai: 8th April 2024

Domestic Market

Domestic sugar prices traded higher

Domestic sugar prices in major markets were traded higher after trading weak for two sessions. Demand is reported to be good and moreover, closure of mills supported the sentiment in the spot markets. Prices in the major markets were reported higher by Rs 10-20 per quintal.

In Muzaffarnagar, M-grade sugar is priced between Rs 3,780 and Rs 3,820 per quintal, while S-grade sugar is expected to cost between Rs 3,420 and Rs 3,460. Agrimandi predicts that the price of S grade sugar in the Kolhapur market will fall to between Rs 3,400 and Rs 3,500 per quintal within the next two weeks.

Ex-mill Sugar Prices as on  April, 8 2024 :

Destination-wise Spot Prices as on April, 8 2024 :

 

International Market

At the time of writing this update London White Sugar #5 front month contract is trading at $645.70 ton, whereas the New York Sugar #11 front month contract is trading at 22.02 c/lb.

Currency, Commodity & Indian Indices

The rupee traded against the US dollar at 83.313 whereas USD was trading with BRL at 5.0648, Crude futures traded at ₹7186, Crude WTI traded at $86.30 barrel. Sensex closed 494.28 points higher at 74742.50 whereas Nifty ended 152.60 points higher at 22666.30

News Round-Up

Efforts required to achieve Zero Fresh Water Consumption (ZFC) and Zero Liquid Discharge (ZLD) in sugar industry

Efforts required to achieve Zero Fresh Water Consumption (ZFC) and Zero Liquid Discharge (ZLD) in sugar industry

Yamunanagar: Sugar mill ends sugarcane crushing operations early this season

Yamunanagar: Sugar mill ends sugarcane crushing operations early this season

Tamil Nadu: Udhayanidhi Stalin assures to set up sugar mill in Omalur

Tamil Nadu: Udhayanidhi Stalin assures to set up sugar mill in Omalur

Russia is seeking to import gasoline from Kazakhstan in case shortages occur on the Russian market because of the diminished refining capacity due to maintenance and damages from Ukrainian drone attacks, Reuters reported on Monday, citing industry sources.

Russia has asked Kazakhstan to prepare to potentially deliver 100,000 tons of gasoline, the sources told Reuters.

Russia is also ready to import gasoline from Belarus if the current domestic supply is insufficient to meet demand.

Russia is estimated to have slashed in half its gasoline exports via railway after imposing a six-month ban on exports from March 1 to ensure sufficient domestic supply in peak demand season, while several refineries are undergoing regular maintenance and urgent repairs after Ukrainian drone strikes.

Russia suspended gasoline exports from March 1 until August 31, 2024, to ensure supply for the domestic market in peak demand season, in a second such export ban in just a few months. In the autumn of 2023, Russia banned exports of diesel and gasoline in an effort to stabilize domestic fuel prices in the face of soaring prices and shortages as crude oil rallied and the Russian ruble weakened.

Russia has seen its refining capacity diminished in recent weeks, due to seasonal maintenance, but most of all due to drone attacks from Ukraine, which have damaged several refineries that have shut down for repairs.

According to Reuters estimates, the amount of Russian oil refining capacity that has been taken offline due to Ukrainian drone strikes is 14% of Russia’s total refining capacity. Calculations show that 900,000 barrels per day of refining capacity have been taken offline by drone strikes, Reuters reported last month.

Most recently, strong spring floods have shut down one refinery in Russia as they compromised a dam in the area forcing the evacuation of thousands of people.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

Fundamentals and geopolitics pushed oil prices to above $90 per barrel last week as more market participants have become bullish on crude. 

After sitting on the sidelines in a more risk-off approach for nearly a year, a growing number of financial market participants now believe that oil is a buy, according to Mike Muller, Head of Asia at the world’s largest independent oil trader, Vitol.      

As Brent oil prices broke above $85 and then $90 per barrel earlier this month, some short-sellers decided to exit their positions, while the fundamentals with current supply issues and expected strong demand, especially in the second half of the year, are driving an increase in the long positions in oil.   

“We have a market that is not necessarily tight in the prompt, but given most people’s projections for later in the year, most people, most consultants, most experts, most advisers are calling for stock draws later in the year, and that’s giving a firm underpinning to the fundamental picture,” Vitol’s Muller said on Gulf Intelligence’s Daily Energy Markets podcast on Sunday. 

“Fundamental physical changes in the oil markets have taken a second-tier back seat to the money flows, and financial markets have convinced themselves this one is a buy,” Muller added. 

Historically, market participation is still low, but there is a realization that energy commodities “correlate extremely well with inflation,” and if there is renewed concern about inflation, oil is a hedge that people seem to want, he added. 

Moreover, the traders that traded the $70-$85 per barrel range – buying oil in the low $70s and selling in the high $80s, have decided to exit with the new range now breaking out, according to Muller. 

Hedge funds and other money managers boosted their net long position – the difference between bullish and bearish bets – in crude oil futures and options in the week to April 2, data from exchanges showed. The combined net long in Brent and WTI, the most traded contracts, jumped to a six-month high, while the net long position in Brent Crude surged to the highest level in two and a half years, according to the data compiled by Saxo Bank.   

Oil may have room to run up to $100 a barrel, especially if OPEC+ sticks to its guns and rolls over the cuts further into the second half of the year when demand is expected to be very strong. 

Vitol, for example, expects refined product demand globally to be “a lot, lot higher” in the second half, at around 2 million barrels per day (bpd) than in the same period last year, Muller told the Gulf Intelligence podcast. 

“We’re not in any way petering out toward peak oil here,” Muller noted.

“We’re at one of the fastest year-on-year growth rates we’ve ever seen in the last 20 years of history.” 

OPEC+ and Saudi Arabia could, of course, change the picture with supply and become tempted to use some of their spare capacity, especially if prices remain strong, analysts say. 

Oil above $90 a barrel could start eroding demand, although there are no signs of this yet. 

In addition, there is one geopolitical aspect of the OPEC+ cuts that shouldn’t be discarded lightly. 

“We should never forget that Russia and Saudi Arabia have it in their hands to not only relax the market but to bring US gasoline prices up before the election,” Christof Rühl, Senior Research Scholar at the Center on Global Energy Policy at Columbia University, said on the same Gulf Intelligence podcast. 

“Now I’m not a conspiracy theorist at all, but in this instance, I think the desire at least on Russia’s part to see Donald Trump win the election must be an overwhelming incentive,” Rühl added. 

$100 oil could also be in sight, experts say. 

The market is currently “on firm fundamental footing,” Bob McNally, founder of consultancy Rapidan Energy and a former White House adviser, told Bloomberg Television in an interview last week. 

“I think $100 oil is entirely real – it just requires a little more risk pricing on the true geopolitical risk.” 

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

Copper is the third most-used metal in the world, and experts believe demand for this important commodity is set to rise in the coming years. At the same time, the supply situation is expected to tighten up.

For that reason, market watchers may be asking, “When will copper go up?” The general consensus is that while prices may not break out in the near term, they will rise once the market truly starts to enter a deficit.

“Most analysts are modeling growing deficits in the copper market balance by 2027-2028, with a near-term forecast (2024-2026) hinting at surpluses until then; however, recent developments suggest a shift toward deficits by late 2024 due to production shortfalls by large producers,” Joe Mazumdar of Exploration Insights said via email.

---

A copper supply/demand imbalance sparked a record-breaking rally in 2021, pushing prices to an all-time high of US$10,724.50 per metric ton (MT) — a record that the metal broke in March 2022, when it hit US$10,730.

Green energy in driver’s seat for copper demand

Copper’s many useful properties have translated into demand from diverse industries. Construction and electronics have long been the main drivers for copper demand, and with a conductivity rating that’s second only to silver, it’s no wonder copper is also an ideal metal for use in energy storage, electric vehicles (EVs) and EV charging infrastructure.

Energy storage may prove to be one of the most copper-intensive markets in the 21st century. According to a 2022 report on the future of copper by S&P Global Market Intelligence, “The rapid, large-scale deployment of these technologies globally, EV fleets particularly, will generate a huge surge in copper demand.”

The firm is projecting that global refined copper demand will nearly double from 25 million MT in 2021 to about 49 million MT in 2035. Energy transition technologies are expected to account for nearly half of that demand growth. “The world has never produced anywhere close to this much copper in such a short time frame,” the firm notes in its report.

China is the world’s largest consumer of the metal, and unsurprisingly its zero-COVID policy wreaked havoc on its economy and demand for copper. When China ended that policy in early 2023, it contributed to the boost seen in copper prices at the time. However, repercussions continue to be seen in the country, particularly in its real estate market.

China’s property sector turmoil is in its third year, with housing starts down by more than 60 percent compared to pre-pandemic levels, as per the International Monetary Fund. However, analysts are starting to call for a bottom as China’s aggressive efforts to energize the sector slowly right the ship — property investment in China fell by just 9 percent year-on-year in the first two months of 2024, compared with a 24 percent fall in December 2023, reported Reuters.

Property sector aside, copper demand out of China is likely to get a boost from the Chinese government’s commitment to investing in its electrical infrastructure and green energy economy. This push can be seen in ongoing structural reforms intended to secure the nation’s place as a global economic powerhouse — these include the Made in China 2025 and China Standards 2035 initiatives. A part of the country’s 14th five year plan, these policies target sectors that are heavily reliant on copper, such as 5G networks, robotics, electrical equipment, EVs, industrial internet, intercity transportation and rail systems, ultra-high-voltage power transmission and EV charging stations.

While the next five year plan is still in the works, there are indications that measures to achieve carbon neutrality and increase renewable energy consumption are still very much a part of China’s long-term economic objectives.

On the EV side, S&P Global projects that sales in China will reach 11.5 million units in 2024, up 22 percent from 2023. The country’s photovoltaic market is also expected to remain strong in 2024.

The EV market is also a growing global source of demand for copper outside China. As the Copper Alliance has noted, EVs can use three to four times as much copper as an internal combustion engine passenger car.

Automakers are making large investments in growing their EV production capacity, with some even looking to secure copper supply. Last year, McEwen Copper, a subsidiary of McEwen Mining (TSX:MUX,NYSE:MUX), received a US$155 million investment from Stellantis (NYSE:STLA), the fourth largest carmaker in the world.

Watch the full interview with Rob McEwen and Michael Meding above.

In a recent interview, Rob McEwen and Michael Meding discussed McEwen Copper’s plans to release a feasibility study for the company’s Argentina-based Los Azules copper project by the first quarter of 2025.

Companies struggling to keep copper supply coming

Of course, demand is just one side of the story for copper prices. For more than a decade, the world’s largest copper mines have struggled with steadily declining copper grades and a lack of new copper discoveries.

The alarm bells have been ringing for a few years now. In a mid-2020 report, S&P Global Market Intelligence metals and mining analyst Kevin Murphy painted a “dismal” picture for copper mine supply. He stated that out of the 224 copper deposits discovered between 1990 and 2019, a mere 16 were discovered in the last decade. These circumstances have led to questions about whether peak copper has arrived.

The COVID-19 pandemic further exacerbated challenges in the global copper supply chain as both mining and refining activities in several top copper-producing countries were slowed or halted altogether. The economic uncertainty also led miners to delay further investments in copper exploration and development — a complicating factor given that it can take more than 15 years to develop a newly discovered deposit into a producing mine.

Speaking at the Prospectors & Developers Association of Canada (PDAC) convention in March, Murphy discussed another factor influencing new copper supply coming to market: inflation. He presented data highlighting how inflation has hamstrung the mining sector. In 2023, exploration budgets for all metals totaled US$12.8 billion, down 3 percent over the previous year.

Murphy also suggested that current economic trends are not only preventing projects from entering the pipeline, but also sandbagging current projects. “Drilling has been in a downtrend as well, and it’s a bit worse than budgets in 2023, which indicates some inflation has hit the mark. It’s a hard industry. The standard is about 3 percent, (and) at the moment we’re thinking that budgets are probably down 5 percent (in 2024),” he stated.

Supply instability out of the world’s largest copper-producing countries, Chile and Peru, has also weighed heavily on the market in the past few years. Together, they represent a combined 40 percent of global output.

In Chile, some of the world’s biggest copper miners, including BHP (ASX:BHP,NYSE:BHP,LSE:BHP) and Anglo American (LSE:AAL,OTCQX:AAUKF), are facing royalty rate increases due to a tax reform bill. The country is also dealing with water woes as drought intensifies, causing tension for miners that rely on water to pump copper to the surface, as well as during the smelting and concentration process.

To the north, in Peru, copper miners have been nervous about the sociopolitical unrest following the impeachment and jailing of former President Pedro Castillo in December 2022, including protests against the mining industry.

However, mining investment is still alive and well in Peru, especially when it comes to copper, and current President Dina Boluarte supports the industry. According to EY, “Of the new mining investments, US$38.5 billion is expected to be allocated to mining projects in Peru, with copper projects accounting for 72 (percent) of the total.”

The supply side of the copper market is also being impacted by production challenges out of some of the world’s major producers. Facing sociopolitical pressure, First Quantum Minerals (TSX:FM,OTC Pink:FQVLF) had to shut down its Cobre Panama mine in late 2023; it accounted for about 350,000 MT of annual global copper production.

Furthermore, Anglo American (LSE:AAL,OTCQX:AAUKF) revised down its 2024 copper production target to a range of 730,000 to 790,000 MT of copper compared to the previous guidance of 1 million MT. This was due in large part to production shortfalls at its Los Bronces copper mine, which is expected to continue into 2025.

Bull market for copper or bust?

Together, strong demand and tight supply can create the right market environment for higher prices.

Copper’s strong rally in recent years has encouraged the idea that even higher copper prices are ahead, which could be a golden opportunity for junior copper companies in the long-term. At a Vancouver Resource Investment Conference copper panel, one speaker explained why this segment of the metals market has piqued his interest.

“I’m a copper bull, it’s a long-term performing asset, but ‘quality’ is what you have to add to the phrase, and I think copper is essential. As we all see the population growth, modernization, electrification, it’s going to be a key metal going forward,” said panelist Ivan Bebek, chairman of Torq Resources (TSXV:TORQ,OTCQX:TRBMF).

So when will copper go up?

S&P Global Commodity Insights has released its copper market forecast for the 2024/2025 period, and it’s calling for prices to average US$8,602 in 2024 and US$9,070 in 2025. While analysts at the firm see robust demand, especially out of Asian markets, they are anticipating a supply surplus in the short term.

The Bank of America has given a higher estimate, saying it sees potential for copper prices to reach US$9,250 for 2024. The bank is concerned about the impact that slower activity in China, rising interest rates and the possibility of a global recession will all have on copper. Yet its analysts are hopeful that the red metal’s role in cleaner energy generation will provide a much-needed layer of support for copper prices.

For its part, Citigroup (NYSE:C) is projecting a copper price of US$15,000 by 2025 on higher demand for the red metal from the green energy revolution.

This is an updated version of an article first published by the Investing News Network in 2021.

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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