Commodities are barreling toward June with a record high in easy reach and a lot for investors to track. The
coming days bring an EU summit, OPEC+ supply talks and the UN’s latest take on the global food crisis.

China’s moves to reboot its bedraggled economy delivered an early boost to prices Monday, amid signs virus outbreaks may have been brought to heel. Crude topped US$120 a barrel and metals
surged.

European Union leaders gather for a summit Monday as the bloc faces huge challenges, not least difficulties in agreeing an embargo on Russian crude. In the US, driving season has kicked off to test tight gasoline markets. Bloomberg’s gauge of commodity prices could easily reach a new all-time high, having closed Friday within 1 per cent of the record it set in April. That’s testimony to the profound impact of Russia’s war on Ukraine.

OIL TALK

Oil is advancing as US motorists gear up for the annual driving season -- now underway -- with gasoline stockpiles plumbing eight-year lows. Tight global crude supplies are keeping prices high even as fears swirl over demand destruction, and the International Energy Agency urges oil producers to act in order to avoid a global recession.
 
Whether they heed that call will become clear on Thursday with the OPEC+ coalition’s monthly meeting. Saudi Arabia and partners have rebuffed pleas for a faster output ramp-up, even as Russian exports falter amid the backlash to its invasion of Ukraine. But with US President Joe Biden considering a visit to the kingdom to repair ties, there’s a chance Riyadh could shift course.

RISING COST OF EATING

The global food crisis could get worse still. The fate of Ukraine‘s grain and fertilizer exports hangs in the balance after Russian President Vladimir Putin said he’d want sanctions relief in exchange for any help. That doesn’t bode well for an end to the disruptions fueling food inflation and crop protectionism.

Still, concerns that India may turn to curbing rice exports eased as the monsoon season arrived early. Watch soybeans too: prices are flirting with an all-time high. And for a broad snapshot of the crops crisis, look to the latest all-in gauge of global food costs from the UN due on Friday.

CHANGE IN CHINA

Copper started the week on an upbeat note, with prices rising after what looks like more decisive steps toward an end to the country’s virus turmoil. Besides an easing of restrictions in Shanghai, Beijing officials said the outbreak there was now under control.

Still, a lot of damage has been done to demand and sentiment, and investors will be tracking how China continues to balance its flagship Zero Covid policy with a sustained economic recovery. A survey on copper’s prospects last week showed little optimism. The May PMI figures due Tuesday will help steer the mood amid a downturn that Premier Li Keqiang described in stark language last week.

DEAL OR NO DEAL

European Union leaders gather for a two-day summit starting Monday with some major business overhanging the Brussels meeting. Crunch weekend talks to agree the terms of an oil embargo against Russia failed, and the proposed ban is not on the official agenda of the two-day summit starting today. The plan has run into trouble mainly because of Hungary’s now entrenched opposition. It’s still possible European nations may clinch a deal in the coming days, if not during the summit. Failure to do so will underscore the difficulties in weaning the bloc off Russian fossil fuels.

NATURAL GAS

US natural gas prices last week surged not far off US$10 per million British thermal units for the first time since 2008 after a 200 per cent rally over the past year. Futures faded a bit by the end of the week, but there are still risks ahead. Inventories are tight, exports of liquefied gas are booming, and shale production has so far failed to catch up.  More gas than usual may be needed to fuel power plants, with hydropower and coal supplies still severely constrained. All of this has stoked concerns over the country’s ability to refill storage ahead of the heating season. Inventories held in underground caverns were 15 per cent below the average for the last five years by May 20, government data show. That’s the largest seasonal gap since 2018.