The markets for coal and natural gas were prepared to close 2022 with significant gains on Friday. Additionally, shortages anticipated in 2023 may fuel further gains. This year’s war in Ukraine and Russia’s cutoff of supplies to Europe rocked the world’s gas markets. These events forced European nations to acquire record amounts of gas to safeguard their supply for the winter.
Quick sum up of 2022
The increased demand for liquefied natural gas (LNG) combined with decreasing piped gas supply put tremendous pressure on the world market. 2022 faced an energy crisis that drove gas prices to all-time highs.
Newcastle coal futures have increased by about 140% in 2022, which is the biggest increase since 2008. Dutch wholesale gas prices and U.S. gas futures have both increased by more than 20%, continuing a three-year trend of growth. Gas prices are anticipated to stay high despite a limited amount of new supply coming online since Europe will keep importing LNG to rebuild its gas reserves after the winter.
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The easing of stringent financial controls in China, the second-largest LNG importer in the world, may potentially encourage an economic rebound and higher LNG usage in 2019. European restriction on gas prices that goes into effect in February may help keep the market in check and lessen the volatility this year.
With expensive energy comes expensive food
Benchmark for Chicago wheat futures reached a record high of $13.63 per half a bushel in March. This is a result of the invasion’s reduction in the amount of grain that Ukraine, a major exporter, could provide as a supply. The market was already being driven higher by unfavorable weather and Covid-related restrictions.
While Malaysia’s benchmark crude palm oil prices rose to an all-time high, corn and soybean prices reached their highest level in ten years.
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Future food commodity prices are anticipated to be sustained because, at least in the first half of 2023. It is doubtful that wheat output can restore depleted global stockpiles. Crops that produce edible oils are struggling as well due to unfavorable weather in Southeast Asia and Latin America.
The world’s largest rice exporter, India, decided in September to reduce supply. This gave the rice market a lift after it had missed the first half of the year’s spike in grain prices. In 2022, the price of 5% broken parboiled rice in India increased by about 6%, and it increased by more than 15% for Vietnam.
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