US to Announce July Inflation as Economy Cools – Commodities Roundup

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

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

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

TOP STORY:

US to announce July inflation as economy cools

US inflation likely remained near a four-decade high in July despite falling energy prices, economists said.

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

The core CPI, which excludes often volatile energy and food prices, is estimated to have accelerated by 6.1% in July compared to the same month a year ago, a sign that broad Pricing pressures persist in the economy.

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

OTHER STORIES:

Investors eye $27 billion in green energy bill funds

The energy package recently passed by the Senate includes $27 billion for so-called green banks that funnel money into renewable projects, though some of the biggest beneficiaries may end up being 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 intended to go to state and local beneficiaries.

The House of Representatives, which is tightly controlled by Democrats, is expected to vote later this week on the package, called the Inflation Reduction Act. If passed and signed by President Biden, various organizations and businesses could apply for the funding and seek EPA approval.

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Swedish Energy Agency says gas storage capacity is 95% full

The Swedish Energy Agency said on Tuesday evening that gas supply in the Danish-Swedish natural gas market is currently robust and Danish gas stores are now 90% full while storage capacity for Sweden is 95% full.

MARKET TALKS:

Lithium prices will remain high due to higher demand and limited supply

10:51 GMT – Lithium prices are set to remain high, according to a note from Fitch Solutions, with higher demand and tight supply supporting the battery metal. Fitch says prices have risen this year due to post-covid demand for lithium chemicals as well as increased demand from the auto industry. This, combined with a lack of lithium projects commissioned in the near term, means it now expects the supply shortfall to widen to 329kt in 2023 from 259kt in 2022, supporting prices. Fitch expects Chinese 99.5% lithium carbonate to average $68,000 per metric ton in 2022 and $55,000 per ton in 2023 – Benchmark Mineral Intelligence currently has prices at $67,050 per ton for technical skills. (yusuf.khan@wsj.com)

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Malaysian palm oil prices fall as traders digest export data

1014 GMT – Malaysian palm oil prices closed slightly lower. The market defied bullish data from the Malaysian Palm Oil Board to trade lower, said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics. Crude palm oil futures appear to have hit highs and should consolidate, he added. Malaysia’s palm oil exports in July rose 11% month-on-month to 1.32 million metric tons, the MPOB said earlier in the afternoon. The benchmark Bursa Malaysia Derivatives contract for October delivery closed down 0.3% at MYR 4,106 per tonne. (yingxian.wong@wsj.com)

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European natural gas storage building progressing well

1011 GMT – Europe’s natural gas storage building is on track to provide ample supply this winter, according to Standard Chartered. Prices have risen in recent weeks as Russia cut gas flow through the Nord Stream pipeline. This has made it harder for EU states to fill their storage, but heavy imports of liquefied natural gas have been a counterbalance, according to the bank. The stored gas could reach 103 billion cubic meters by the start of winter “which should provide sufficient insulation even if there is no more Russian gas”, the bank said in a note. “It was once thought unthinkable that Europe could comfortably winter without Russian gas, but thanks to the strength of the inventory, we now believe it is possible.” (william.horner@wsj.com)

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European natural gas price rises on supply fears

0907 GMT – Natural gas prices rise but remain below recent highs as winter supply concerns continue to keep prices buoyant. Benchmark natural gas prices in Europe increased by 3.6% to reach 202.75 euros per megawatt hour. Reduced Russian gas flows to Europe have thwarted efforts to fill the region’s gas storage reservoirs to sufficient levels ahead of the peak winter period. Failure to do so in time could force European states to ration supplies. “Europe’s natural gas imports continue to show signs of reduction,” Marex said in a note. Storage levels in the region are currently between 68% and 71%, below 2020 levels but above 2021 levels, according to the firm. EU states are aiming for 80% by winter. (william.horner@wsj.com)

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Metals wobble ahead of US inflation data

07:35 GMT – Metal prices falter ahead of the release of US consumer price inflation in July, with economists expecting inflation to have already peaked in June. Three-month copper prices are flat at $7,958.50 per metric ton while aluminum prices are up 0.3% at $2,480 per ton. Gold, meanwhile, is down 0.3% at $1,807 per troy ounce after rising above $1,800 per ounce at the start of the week. “Markets appear to be approaching today’s important U.S. CPI with a bit of trepidation,” Jim Reid, head of global fundamental credit strategy at Deutsche Bank, said in a note. The nervousness is hardly surprising given that the rise in the CPI has promoted volatility this year, pushing the Federal Reserve into further monetary tightening, Reid adds. (yusuf.khan@wsj.com)

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Oil slows before inflation in the United States

07:31 GMT – Oil prices are falling after data showed US crude inventories rose last week. Brent crude oil fell 0.7% to $95.56 a barrel. The American Petroleum Institute said U.S. crude inventories rose 2.2 million barrels in the week through Friday, the second monthly increase of this magnitude. All the attention on Wednesday will be on US inflation data. A higher-than-expected CPI could send risk assets tumbling as investors expect the Federal Reserve to ease interest rate hikes and vice versa, said Brian O’Reilly, chief strategy officer at market at Mediolanum. “I don’t recall a larger data printout in terms of the market’s short-term direction,” he says. (william.horner@wsj.com)

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Fall in iron ore futures; Losses can be limited

02:33 GMT – Iron ore futures fall in Asian morning session ahead of tonight’s July US CPI report which could support bets on 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 emerged in Europe as producers adjust to the outlook for higher energy costs this quarter, particularly in Germany, says Alistair Ramsay, vice president of Rystad Energy, in an e -mail. The most traded iron ore contract in January 2023 on the Dalian Commodity Exchange is down 0.7% at CNY 732.0 per ton. (ronnie.harui@wsj.com)

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Aluminum futures fall amid signs of increased supply

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

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