Five key charts to watch in global commodity markets this week

A year ago this week, US President Joe Biden signed into law the landmark Inflation Reduction Act, pouring hundreds of billions of dollars into efforts to respond to the climate crisis and boost the nation’s reliance on clean energy. This year, the world has seen devastating wildfires, extreme weather and war combine to further destabilise food and energy markets and push power grids to their limits.

Here are five notable charts — actually, one is a map — to consider in global commodity markets as the week gets underway.

Emissions

Wednesday marks the anniversary of the climate law that has channeled upwards of $370 billion into clean-energy initiatives as the US aims to reduce its carbon footprint. Under current policies, the country is set to drive emissions of harmful greenhouse gases to 32%-51% below 2005 levels in 2035, according to an annual analysis by Rhodium Group. By 2030, the US is on track to achieve a 29%-42% reduction — a notable improvement from previous forecasts, but not enough to meet its pledge under the Paris Agreement, the group’s data show. This puts greater emphasis on additional policies by states and local governments, as well as the private sector, to help achieve the ambitious targets.

Climate

July was officially Earth’s hottest month on record, according to the European Union’s Copernicus Climate Change Service. In the US, four states — Arizona, Florida, Maine and New Mexico — set fresh records last month, data from the National Oceanic and Atmospheric Administration released August 8 show. With blistering heat prevailing again this month, power grids — as well as crops like wheat, corn and soybeans — will most certainly continue to come under pressure. Biden recently said the extreme heat is costing the US $100 billion a year.

Agriculture

The combination of India’s decision to ban a large portion of its rice exports and the increasing threat of an El Niño weather pattern on harvests in key producers has sent prices of the grain surging. Benchmark Thai white rice jumped to $648 a ton last week and is on course for the biggest monthly advance since January 2018, threatening the availability of a food staple for billions in Asia and Africa. With robust demand and shrinking supplies ahead, rice’s rampant rally looks set to continue.

Oil

US oil production is set to grow faster than previously forecast, according to the latest government data. That’s welcome relief to a market that has tightened in the wake of Saudi Arabia’s output cuts, which are set to extend at least into September, and those of Russia. And despite growing evidence of a warming planet, global oil demand has never been stronger. World consumption averaged 103 million barrels a day for the first time in June amid robust Chinese demand, strong summer air travel and increased use in power generation, the International Energy Agency said Friday. That should support further price gains in the months ahead. Both West Texas Intermediate and Brent futures — the global benchmark — are coming off their seventh straight weekly advance.

Natural gas

Traders will be focused on whether strikes materialize at three major liquefied natural gas facilities in Australia, which threaten to disrupt about 10% of global LNG exports. While Europe rarely receives LNG from Australia, the potential shortage will impact Asia buyers, who would need to compete with the continent for replacement cargoes. Even though Europe has built up much higher inventories than usual for the time of year — and sources its LNG from a wide variety of suppliers — benchmark natural gas prices surged last week by the most since June as concerns re-emerged over the continent’s ability to secure enough supplies ahead of winter should a squeeze emerge in Asia.

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