Shell Posts Record Quarterly Profit on Soaring Energy Prices — Commodities Roundup

MARKET MOVEMENTS:

– Brent crude oil moved 2.1% higher to $103.75 a barrel.

– European benchmark gas rose 0.4% to EUR206.70 a megawatt-hour.

– Gold futures rose 1% at $1,737.20 a troy ounce.

— Three Month copper prices moved 0.9% higher to $7,722 a metric ton.

— Wheat futures rose 1.9% to $8.05 a bushel.


TOP STORY:

Shell Posts Record Quarterly Profit on Soaring Energy Prices

Shell PLC reported a second consecutive record quarterly profit as the oil major benefited from soaring global energy prices and a continued rebound in the global economy.

The London-based company said Thursday that strong demand and higher prices had allowed it to reverse $4.3 billion in impairments it took early in the Covid-19 pandemic. It also said that strong fuel-refining earnings had added more than $1 billion in profit in the second quarter.

Shell’s results are the latest sign of a recovery in the fortunes of the world’s largest oil companies, which saw demand decimated by the outbreak of Covid-19 in early 2020. As the pandemic took its toll, travel plummeted and weak demand led Shell and its peers to write down tens of billions of dollars in assets on expectations of sustained lower oil and gas prices.


OTHER STORIES:

Anglo American 1H Earnings Fall Less Than Expected

Anglo American PLC on Thursday reported lower earnings for the first half of the year, but the results were better than expected by analysts.

The multinational mining company generated underlying earnings before interest, taxes, depreciation and amortization of $8.70 billion in the first half of 2022, down from $12.14 billion a year earlier. This was above the Vuma market consensus of $8.56 billion, based on 10 analysts’ estimates.

Miners Unfazed by China’s Plan to Control Iron-Ore Imports

Some of the world’s largest iron-ore miners said they expect the market to continue dictating prices of the commodity despite China setting up a centralized buying group to try to gain more sway.

China Mineral Resources Group was established by Beijing this month as part of a drive to secure more control over resources needed for the country’s growth at a time of rising tensions with the West. More than half of China’s iron-ore imports arrive from Australia, which has faced a trade backlash from Beijing after calling for an investigation into the origins of Covid-19 in central China.

Australian mining executives said China had kept them in the dark about the new centralized buying group, although speculation that Beijing wanted to beef up its negotiating power for iron ore had intensified after officials published a plan in January to become more self-reliant in resources and energy.

Gold Investment Remains Attractive Despite Demand Slip on Dollar Strength

Demand for gold fell during the second quarter of 2022 as the strength of the dollar weighed on prices for the precious metal, but macroeconomic weakness is still likely to ensure it remains an attractive investment, the World Gold Council said in a report Thursday.

Gold demand fell by 8% from the same period in 2021 to 948 metric tons, with much of the weakness related to the dollar’s strength, the WGC said.

Pressure from the greenback pushed gold prices 6% lower during the quarter, with rising interest rates also a factor, the council said.

Sierra Leone Awarded $2 Million Grant to Boost Food Production

Sierra Leone has been awarded a $2 million grant to boost food production by the African Development Bank Group’s African Development Fund, the country’s government said on Wednesday.

The money is targeted toward the production and marketing of rice. Sierra Leone’s agriculture ministry will buy and subsidize rice seeds, fertilizer and insecticides to help 67,000 small farmers boost food production during the next two farming seasons.


MARKET TALKS:

Palm Oil Rises Amid Prospects for Slower Malaysian Production

1017 GMT – Palm oil rose amid expectations for slower Malaysian production. Malaysia’s crude palm-oil production for July is poised to decline after reasonably high growth in June, Avtar Sandu, senior commodities manager at Phillip Nova, says in an email. Palm production tends to follow a cyclical pattern of high and low growth as crops need nitrogen for yields to recover, the manager adds. The benchmark Bursa Malaysia Derivatives contract for October delivery was up MYR135 at MYR3,961 a metric ton. (ronnie.harui@wsj.com)

European Natural Gas Prices Steady, Hovering Near Record High

0911 GMT – European natural gas prices stabilize around the EUR200 a megawatt-hour level as the market watches for further news about Russian gas flows through the Nord Stream pipeline. Benchmark regional prices are down 1.1% at EUR203.62 a megawatt-hour but remain just below their recently set all-time high of EUR228.40. Concerns about supply shortages this winter have sent gas prices soaring even as high prices could weigh on demand, says JPMorgan. The bank estimates that gas to oil switching will total 700,000 barrels a day between October and March. “Natural gas prices are so high in Europe that there is simply no economic reason not to find other fuels,” the U.S. bank says in a note. (william.horner@wsj.com)

Oil Rises After Federal Reserve’s Interest Rate Hike

0804 GMT – Oil prices rise after the U.S. Federal Reserve increased interest rates on Wednesday, helping to turn the macroeconomic mood more bullish. Prices for Brent crude and WTI are both up 1.6% to $103.30 and $98.84 a barrel, respectively. Stephen Innes, managing partner at SPI Asset Management, says the Fed’s change in tone “signaled monetary policy is now in neutral territory,” which represents a significant change for markets, as fewer interest rate hikes are now expected, thus striking a bullish tone for oil. Further support for oil came from reduced supply as “U.S. crude stockpiles dropped 4.52 million barrels last week while exports surged to a record high of 4.55 million barrels per day,” Innes says in a note. (yusuf.khan@wsj.com)

Metals Rally Following Fed Rate Hike

0730 GMT – Metals prices are rallying after the Federal Reserve increased interest rates by 75 basis points. Three-month copper prices are up 1.9% at $7,801 a metric ton–the highest since July 8–while aluminum is up 1.7% to $2,466 a ton. Gold is also 1.2% higher at $1,739.20 a troy ounce. “‘The worst is behind us!’ was the macro sentiment yesterday and markets saw a strong risk-on rally,” Peak Trading Research says in a note. Following yesterday’s rate hike, Peak says the market is now pricing fewer increases this year helping to boost sentiment that the economy is not in recession. “This macro improvement matters,” Peak adds. (yusuf.khan@wsj.com)


Write to Yusuf Khan at yusuf.khan@wsj.com


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