US to Report July Inflation as Economy Cooled — Commodities Roundup

MARKET MOVEMENTS:

–Brent crude oil fell 1.3% to $95.07 a barrel.

–European benchmark gas rose 5% to EUR205.50 a megawatt-hour.

–Gold futures edged down 0.2% to $1,807.10 a troy ounce.

–Three-month copper prices rose 0.3% to $7,981.50 a metric ton.

–Wheat futures rose 1.1% to $7.90 a bushel.


TOP STORY:

U.S. to Report July Inflation as Economy Cooled

U.S. inflation likely remained close to a four-decade high in July despite cooling energy prices, economists say.

The Labor Department on Wednesday is estimated to report that the consumer-price index rose 8.7% in July from the same month a year ago, down from 9.1% in June, according to economists surveyed by The Wall Street Journal. June marked the fastest pace of inflation since November 1981.

Core CPI, which excludes often volatile energy and food prices, is estimated to have accelerated in July by 6.1% from the same month a year ago, a sign that broad price pressures remain in the economy.

The CPI measures what consumers pay for goods and services. The figures will be released at 8:30 a.m. ET on Wednesday.


OTHER STORIES:

Investors Eye Energy Bill’s $27 Billion in Green Funds

The energy package recently passed by the Senate includes $27 billion for what are called green banks that funnel money into renewable projects, although some of the biggest beneficiaries could ultimately be private-sector investors.

The legislation allocates the money to a greenhouse-gas reduction fund, with about $20 billion earmarked for national or regional funds that would be overseen by the Environmental Protection Agency. The rest of the money is designed to go to state and local recipients.

The House of Representatives, which is narrowly controlled by Democrats, is expected later this week to vote on the package, called the Inflation Reduction Act. If it passes and is signed into law by President Biden, various organizations and companies could apply for the funding and would seek approval from the EPA.

Swedish Energy Agency Says Gas Storage Capacity is 95% Full

The Swedish energy agency said late Tuesday that gas supply on the Danish-Swedish natural gas market is currently robust and Danish gas stores are now 90% full while Sweden’s storage capacity is 95% full.


MARKET TALKS:

Lithium Prices to Remain Elevated on Higher Demand, Constrained Supply — Market Talk

1051 GMT – Lithium prices are to remain high, according to a note from Fitch Solutions, with higher demand and tight supply supporting the battery metal. Fitch says prices have rallied this year on post-covid demand for lithium chemicals as well as higher demand from the auto industry. This combined with a lack of lithium projects coming online in the near term means that it is now forecasting the supply deficit to widen to 329kt in 2023 from 259kt in 2022, supporting prices. Fitch expects Chinese lithium carbonate 99.5% to average $68,000 a metric ton in 2022 and $55,000 a ton in 2023 – Benchmark Mineral Intelligence has prices at $67,050 a ton for technical grades currently. (yusuf.khan@wsj.com)

Malaysia Palm-Oil Prices Fall as Traders Digest Export Data

1014 GMT – Malaysian palm-oil prices closed slightly lower. The market has defied bullish Malaysian Palm Oil Board data to trade lower, said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics. Crude palm oil futures seem to have tested highs and are expected to consolidate, he added. Malaysia’s July palm oil exports rose 11% on month to 1.32 million metric tons, MPOB said earlier in the afternoon. The benchmark Bursa Malaysia Derivatives contract for October delivery closed 0.3% lower at MYR4,106 a ton. (yingxian.wong@wsj.com)

European Natural-Gas Storage Building Is Making Good Progress

1011 GMT – European natural-gas storage building is on track to provide sufficient supplies come winter, says Standard Chartered. Prices have risen in recent weeks as Russia curtailed the flow of gas through the Nord Stream pipeline. That has made it harder for EU states to fill their storage but strong imports of liquefied natural gas have been a counterweight, the bank says. Gas in storage could reach 103 billion cubic meters by the start of winter “which should provide sufficient insulation even if no more Russian gas flows,” the bank says in a note. “It was once thought unthinkable that Europe could get through a winter comfortably without Russian gas, but thanks to the strength of the inventory build, we now think it can.” (william.horner@wsj.com)

European Natural Gas Price Tick Higher on Supply Fears

0907 GMT – Natural gas prices rise but remain below their recent highs as winter supply concerns continue to keep prices supported. Benchmark European natural gas prices rise 3.6% to EUR202.75 a megawatt hour. Reduced Russian gas flows to Europe have confounded efforts to fill the region’s gas storage tanks to sufficient levels before the high-demand winter period. Failure to do so in time could see European states forced to ration supplies. “Natural gas imports in Europe continue to exhibit signs of curtailment,” Marex says in a note. The region’s storage levels are currently between 68% and 71%, below 2020 levels but above 2021 levels, the firm says. EU states are targeting 80% by winter. (william.horner@wsj.com)

Metals Waver Ahead of US Inflation Data

0735 GMT – Metals prices are wavering ahead of July’s U.S. consumer price inflation release, with economists expecting inflation to have already peaked in June. Three-month copper prices are flat at $7,958.50 a metric ton while aluminum prices are up 0.3% to $2,480 a ton. Gold meanwhile is 0.3% lower at $1,807 a troy ounce having pushed past $1,800 an ounce at the start of the week. “Markets seem to be going into today’s all important U.S. CPI a little on the apprehensive side,” says Jim Reid, head of global fundamental credit strategy at Deutsche Bank, in a note. Nerves are hardly surprising given higher CPI has aided volatility this year, pushing the Federal Reserve to further monetary tightening, Reid adds. (yusuf.khan@wsj.com)

Oil Ticks Down Ahead of US Inflation Print

0731 GMT – Oil prices tick lower after data showed U.S. crude inventories rose last week. Brent crude oil declines 0.7% to $95.56 a barrel. The American Petroleum Institute said U.S. crude stocks rose by 2.2 million barrels in the week through Friday, a second monthly build of that magnitude. All focus Wednesday will be on U.S. inflation data. A higher-than-expected CPI figure could send risk assets falling as investors expect the Federal Reserve to ease off interest-rate hikes and vice versa, says Brian O’Reilly, head of market strategy at Mediolanum. “I can’t remember a more important data print in terms of the near-term direction of the market,” he says. (william.horner@wsj.com)

Iron Ore Futures Fall; Losses May Be Limited

0233 GMT – Iron ore futures fall in the Asian morning session ahead of tonight’s U.S. July CPI report that may support bets for aggressive Fed tightening, although losses may be limited amid signs of stability in steel markets in some parts of the world. Signs of such stability have been emerging in Europe as producers adjust to prospects of rising energy costs this quarter, especially in Germany, says Alistair Ramsay, vice-president of Rystad Energy, in an email. The most-traded January 2023 iron ore contract on the Dalian Commodity Exchange is down 0.7% at CNY732.0 a ton. (ronnie.harui@wsj.com)

Aluminum Futures Fall Amid Signs of Increased Supply

0204 GMT – Aluminum futures fall in the Asian morning session amid signs of increased supply. Data from Shanghai Metals Market show China’s aluminum production rose 6.7% on year to 3.5 million tons in July. China’s output hit a fresh record of 3.5 million tons in July, ANZ Research analysts note in a research report. However, Shanghai Metals Market reported that an aluminum smelter in Sichuan province suffered an accident which affected its output by 190,000 tons, and this latest disruption threatens to tighten the market further, the analysts add. The three-month LME aluminum futures contract is down 0.6% at $2,476.50 a ton. (ronnie.harui@wsj.com)


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