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The banking sector turmoil that has spilled into vitality and metallic markets is more likely to be restricted in length with solely minimal harm to the broader economic system, in response to among the world’s greatest commodity merchants.
Sebastian Barrack, head of commodities at Citadel, the world’s most profitable hedge fund that at occasions invests closely in vitality and agriculture markets, mentioned the impression was more likely to be contained with fundamentals reasserting themselves as soon as the rapid panic handed.
“There may be emotion and concern, which might drive markets within the brief time period,” he mentioned on Monday on the sidelines of the FT Commodities World Summit.
“However this isn’t a repeat of the nice monetary disaster of 2007-2008. We don’t imagine it will have a cloth impression on commodities demand like we noticed in these years.”
In 2008 oil costs crashed from virtually $150 to just about $30 a barrel in a matter of months because the deep recession brought on by the monetary disaster hammered demand. Metals and different commodities additionally fell sharply.
Commodity costs have been underneath strain within the final week as instability in corners of the worldwide banking system has sparked fears of additional contagion.
Brent crude oil, the worldwide benchmark, has fallen about 10 per cent within the final week, hitting a low of $70.12 a barrel on Monday morning shortly after UBS’s government-backed takeover of Credit score Suisse — the bottom value stage since Russia’s full-scale invasion of Ukraine. European gasoline costs additionally fell beneath €40 per megawatt hour for the primary time since 2021.
Trafigura, one of many world’s largest vitality and metals merchants, additionally mentioned that whereas nervousness might seep throughout markets within the brief time period, the corporate didn’t see a major threat of additional contagion, like in 2008.
“Well-known final phrases, however thus far it doesn’t really feel like we’re in that state of affairs,” Saad Rahim, chief economist at Trafigura, informed the convention.
Nevertheless, Guillaume de Dardel, head of vitality transition metals at Switzerland-based commodity dealer Mercuria, mentioned the monetary atmosphere and excessive rates of interest might have a knock-on impact on vitality transition initiatives.
“The atmosphere we’re in is popping in direction of a extra risk-off kind of atmosphere. Actually on the financing facet for initiatives, it will make it tougher, when it is vitally a lot required if we would like the transition to work.”
Barrack at Citadel mentioned he anticipated pure gasoline costs to stay underneath strain, however with oil in all probability rising within the second half of the yr.
“European costs would have fallen beneath €40 per megawatt hour even with out the present state of affairs in markets — pure gasoline is bearish, in each Europe and North America, as we’ve had a light winter and have an oversupply.
“The second half of this yr nonetheless suggests a considerably tightening [of the oil] market because the Opec+ [production] cuts feed via and demand continues to rise.”
Oil costs stabilised afterward Monday, with Brent buying and selling again almost $73 a barrel, with many merchants predicting the market was set to tighten as US shale development slows and Chinese language demand picks up as its economic system reopens.
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