Data from the Mercantile Exchange Of VietNam (MXV) shows a marked divergence in the global raw material market for the week of February 12-18. The escalation of conflicts in the Middle East has driven oil prices up for the second consecutive week, and precious metals have also risen due to their safe-haven status. Conversely, agricultural and industrial raw material prices were predominantly negative. By the end of the week, the MXV-Index for three out of four commodity groups declined, pulling the MXV-Index down by 1.04% to 2,111 points. The average daily trading value across the exchange was over 3,500 billion VND.

Oil Prices Rise for the Second Consecutive Week

According to MXV, by the end of the past trading week, oil prices had increased for the second consecutive week amid rising geopolitical tensions in the Middle East. Additionally, concerns about tightening global supply have contributed to market buying pressure.

By week’s end, WTI oil prices rose by 3.06% to $79.19 per barrel, while Brent crude increased by 1.56% to $83.47 per barrel.

Reuters reports that negotiations between the US, Egypt, Qatar, and Israel over a Gaza ceasefire have ended without progress. Furthermore, Hezbollah leaders have stated that the conflict against Israel will likely escalate further.

In the Red Sea, threats to cargo ships from Houthi disruptions persist. The UK Maritime Trade Operations (UKMTO) has received reports of a vessel struck by a missile near Al Mukha, Yemen. The US State Department also noted that the Panama-flagged crude oil tanker M/T Pollux encountered similar issues while en route to India. Ongoing geopolitical instability, which poses a risk of supply disruption, is a key factor supporting oil prices.

US supply constraints are also driving the price increase this week. The Energy Information Administration (EIA) forecasts a 0.2% rise in crude oil production from seven major US shale basins to 9.72 million barrels per day in March, a slowdown compared to last year’s average monthly growth of around 0.9%. Meanwhile, Baker Hughes data shows a decrease of two oil rigs in the US to 497 rigs as of February 16. This reduction could exacerbate market deficits as OPEC+ continues its production cuts.

Adding to the price support, Russian seaborne crude oil exports have decreased from a seven-month high. Specifically, weekly export flow fell by about 290,000 barrels per day to 3.49 million barrels per day as of February 11. Russian refinery throughput also saw a 4% decrease in the first two weeks of February compared to January, and an 8.6% decrease year-on-year.

In another notable development, natural gas prices plummeted more than 12% to their lowest level since July 2020, due to lower-than-expected inventory declines and warmer weather forecasts limiting heating demand. The EIA reported a 49 billion cubic feet (bcf) decrease in US natural gas inventory for the week ending February 9, less than the 68 bcf decline predicted by analysts and a reduction from the 117 bcf drop during the same period last year, as well as a decrease from the 119 bcf average reduction over the past five years.

Middle East Conflict Drives Precious Metals Buying

By the end of the trading week, all ten major metal commodities closed in the green, with several experiencing significant gains over 4%. Notably, precious metals saw substantial increases, with silver rising 3.9% to $23.47 per ounce and platinum increasing 4.02% to $913.50 per ounce. The primary driver was the heightened geopolitical tension in the Middle East, increasing the appeal of these metals as safe havens.

Officials report that Gaza’s largest hospital is surrounded amid the Israel-Hamas conflict, with airstrikes targeting Rafah, the last refuge for Palestinians in the area. Hamas leader Haniyeh has stated that he will accept no conditions short of a complete end to the conflict, withdrawal of occupying forces, and removal of unjust blockades.

The escalation has driven up demand for silver and platinum as safe-haven assets, pushing the prices of these metals higher. Silver even reached a one-month high, despite pressure from the rising US dollar following US data indicating inflation is returning in January.

However, Federal Reserve Bank of Atlanta President Raphael Bostic stated on Friday (February 16) that he is open to the possibility of interest rate cuts in the coming months. This has somewhat eased market sentiment and boosted buying in silver and platinum.

For base metals, COMEX copper surged 4.26% to $3.83 per pound after two weeks of declines. Iron ore increased 3.67% to $131.27 per ton. The price increase for base metals is mainly attributed to expectations of positive economic signals from China due to government stimulus measures post-holiday. Additionally, construction activity typically peaks in March, leading many factories to increase production and stockpiling, which improves consumption outlook in China.

According to official reports from Bloomberg, over 61 million rail trips were made in the first six days of China’s Lunar New Year holiday. This is the highest number recorded by Bloomberg in the past five years and represents a 61% increase compared to the same period in 2023.

Source: MXV