Commodity Daily Report (March 19): Geopolitical situation drives widespread gains in oil, gas, and chemical energy sectors; metals decline sharply under pressure

Originally from: Xinhua Finance

Xinhua Finance Beijing, March 19 (Guo Zhouyang, Wu Zhengsi) The domestic commodity futures market declined broadly on March 19, with few gains. Liquefied petroleum gas hit the daily limit with a 10.99% increase; LU rose over 10%; methanol and SC crude oil gained over 8%; ethylene glycol, fuel oil, and propylene rose over 6%; polypropylene, apples, asphalt, and plastics increased over 4%; styrene, BR rubber, and pure benzene rose over 1%. Declining varieties included Shanghai silver, which fell over 10%; palladium, over 8%; platinum, over 7%; Shanghai tin and lithium carbonate, over 6%; polysilicon, over 5%; Shanghai gold, international copper, and Shanghai copper, over 4%; Shanghai zinc, over 3%; Shanghai nickel, aluminum, rubber, aluminum alloys, soybean, live pigs, and NR, over 2%; industrial silicon, bottle chips, Shanghai lead, European container shipping, stainless steel, glass, alumina, coking coal, and para-xylene, over 1%.

By the close of trading on the 19th, the China Securities Commodity Futures Price Index closed at 1,783.57 points, down 29.74 points or 1.64% from the previous trading day; the China Securities Commodity Futures Index closed at 2,457.85 points, down 40.99 points or 1.64%.

China Securities Commodity Futures Price Index intraday chart (Source: Xinhua Finance Professional Terminal)

Energy, chemicals, and oil continue to rise sharply; liquefied gas hits the daily limit

After attacks on energy facilities, Iran has retaliated, further strengthening bullish sentiment in the energy markets. According to reports from Tasnim News Agency and other Iranian media on the 18th, some petrochemical facilities in South Pars and Asaluyeh, Busher Province, Iran, were attacked by the US and Israel. Iran responded with retaliatory strikes targeting US-related oil facilities. Additionally, Mehr News Agency reported on the 18th that the Iranian Islamic Revolutionary Guard Corps issued an emergency warning, stating that oil facilities in Saudi Arabia, the UAE, and Qatar have become legitimate targets.

Against this backdrop, domestic energy and chemical commodities surged again on March 19. By the close, liquefied petroleum gas hit the daily limit with a strong upward move; low-sulfur fuel oil rose over 10%, ranking among the top two daily gainers. Methanol, SC crude oil, ethylene glycol, fuel oil, propylene, and polypropylene also closed with gains of 6% to over 8%. The escalation of the US-Israel-Iran conflict continues to push oil prices higher. Coupled with disruptions to natural gas production, increased processing costs for liquefied gas, and transportation obstacles, these factors are bullish. In the short term, geopolitical tensions dominate the liquefied gas market, overshadowing seasonal demand and inventory pressures. Analysts believe the strong pattern for liquefied gas may persist, with future focus on geopolitical developments.

Similarly, influenced by geopolitical tensions, methanol opened sharply higher during the night trading session on the 18th, reaching above 3,200 yuan/ton for the first time since 2022. By the close, the main contract’s gains slightly narrowed to 8.64%. Expectations of reduced Iranian methanol imports have strengthened port destocking, and overall demand has turned more bullish, creating a positive feedback loop for methanol’s short-term fundamentals and sentiment. Given the ongoing US-Israel-Iran conflict, analysts expect methanol prices to remain volatile but generally strong in the short to medium term, possibly maintaining high levels for some time. On the trading charts, despite intraday fluctuations, the distant contracts (2610 and 2611) both hit the daily limit up.

Other commodities also showed broad bullish sentiment, with asphalt, plastics, and styrene closing higher to varying degrees.

Geopolitical escalation fuels inflation fears; metals plunge under pressure

Geopolitical tensions drove oil prices higher again. The US February PPI exceeded expectations, intensifying inflation concerns. The Federal Reserve announced no change to interest rates, with Powell stating that the impact of rising oil prices on consumption remains uncertain, leading the Fed to adopt a wait-and-see approach. However, overall, rising oil prices are expected to exert downward pressure on spending and employment while pushing inflation higher. These risks make the Fed’s position very difficult. Markets have lowered and delayed expectations for rate cuts, with traders now estimating a 50% chance of a cut this year; Morgan Stanley has pushed back its rate cut expectations to September and December, from previous forecasts of June and September. The US dollar index rose, putting gold and other precious and base metals under broad pressure.

While precious metals weakened in the short term due to geopolitical tensions, the market generally remains optimistic about their medium- and long-term outlook. CICC Futures notes that central bank gold purchases, de-dollarization trends, and stagflation risks are core supports for precious metals. First, global central banks continue to increase gold reserves to hedge against declining dollar confidence and diversify foreign exchange holdings. Second, “de-globalization” and rising geopolitical risks increase uncertainty in the international monetary system, boosting gold’s strategic value. Additionally, concerns over a “low growth + high inflation” stagflation environment highlight gold’s role as an inflation hedge. The long-term upward trend remains intact. In the short term, the Fed’s hawkish stance and a strong dollar are main headwinds; however, further escalation of geopolitical tensions or recession risks could reignite gold’s safe-haven appeal.

Among base metals, Shanghai tin futures led declines today, falling 6.61%. Fundamentally, supply has somewhat eased; according to Southwest Futures, approval for Wa State explosives has been completed, and tin mine output is expected to increase; domestic processing fees have recovered, stabilizing refined tin production; imports from Indonesia have resumed. However, downstream consumption remains complex, with traditional sectors under pressure but emerging sectors supported. The upcoming photovoltaic tax rebate deadline in April continues to boost export demand in the short term. Overall, tin prices are under pressure but supported at lower levels. Geopolitical uncertainties may cause short-term volatility, so risk control is advised.

Additionally, the main contract for live pigs has declined for the fourth consecutive trading day, with supply remaining strong and demand weak. Futures are trading at a premium to spot, and market sentiment remains bearish. Although some recovery occurred late in the session due to news, the overall decline exceeded 2% at close. Looking ahead, Everbright Futures believes that before supply pressures are effectively alleviated, pig prices are likely to remain weak, with attention on feed costs and related commodity prices affecting pig prices.

Editor: Zhang Yao