Crude, among the few winning commodities in 2022

Oil achieved its second consecutive annual rise in 2022, being one of the few assets that managed to point to green numbers in the markets in a turbulent year marked by the Russian invasion of Ukraine, high inflation, increases in interest rates and the fears of a global recession.

North Sea Brent closed 2022 with an annual rise of 10.45% to $85.91 per barrel, while the US benchmark West Texas Intermediate (WTI) rose 6.71% to $80.26 per barrel

2022 was a turbulent year for raw materials, full of volatility, especially in the case of the oil market.

Although days after the start of the war between Russia and Ukraine, crude oil rose above 130 dollars per barrel (reaching its highest level since 2008), starting in the second half of the year it began to drop significantly, with a drop accumulated since then and until the end of the year of 30 percent.

Han Tan, an analyst at Exinity, explained that sanctions against Russia, one of the world’s largest hydrocarbon producers, initially sent prices soaring, but “supply fears gave way to demand concerns.”

The market began to worry that the increases in interest rates by the world’s central banks, especially the Federal Reserve (Fed) of the United States, to contain inflation, could cause a slowdown in the economy, which which in turn would cause a demand for energy. Another factor that put pressure on oil prices was the persistence of the Covid-19 pandemic in China, the largest importer of the raw material.

“The pressures continue to be related to concerns about demand, since the possibility of the main economies falling into a mild recession, such as the United States and countries in Europe, as well as an economic slowdown in China, continues,” said Gabriela Siller, Director of Analysis at Banco Base.

At the beginning of December, oil reached lows not seen since the end of 2021, although in the case of Brent and WTI they managed to recover in recent weeks to close the year with gains.

However, that was not the case of the Mexican export mix, which failed to reverse the declines of the second half of the year and closed 2022 with a loss of 2.22%, trading at $69.71 per barrel.

Since the second half of the year, the Mexican mix is ​​down 39.41 percent.

“This has been an extraordinary year for commodity markets, with supply risks leading to increased volatility and higher prices,” said Ewa Manthey, an analyst at ING. “2023 will be another year of uncertainty, with a lot of volatility.”

Craig Erlam, an analyst at OANDA, said investors are likely to remain cautious in 2023, as rate hikes and recession concerns dampen their prospects.

Volatility is not likely to go anywhere fast as we navigate another highly uncertain year,” he said.

Gasoline closes lower

The price of gasoline in the United States managed to close the year with a decline, thanks to the reduction in oil prices in the second half of the year.

During the last week of 2022, regular gasoline had an average price of $2,971 per gallon, which indicated an annual reduction of 5.26 percent. In June, when crude oil was trading above $120 a barrel, US fuel hit an all-time high of $4,844 a gallon.

For their part, other fuels such as natural gas closed the year with increases, just like oil.

The United States natural gas (NYMEX) rose 18.96% in the year, closing at 4,436 dollars per barrel, gaining 18.96%, while the TTF (Europe) natural gas rose 8.49% in 2022 to 76,315 euros per megawatt hour.

“During the year, gains in energy were mainly associated with downside risks to supply, with Russia’s invasion of Ukraine and the energy crisis in Europe that began after the coronavirus pandemic and worsened with the invasion of Ukraine”, stated Gabriela Siller.

Steel, with historic drop

Industrial metals ended the year with losses, dragged down by demand concerns created by rising Covid-19 cases in top consumer China, as well as slowing global growth and rising inventories.

Aluminum had a historic annual drop of 48.15% in 2022, trading at $744 per metric ton at the end of the year. For its part, copper fell 13.87% to $8,372.00 per metric ton.

Other metals such as aluminum (-15.30%) and zinc (-15.89%) also closed the year down, while nickel and silver -which is considered both precious and industrial- ended 2022 with increases of 44.76 and 3.65 %, respectively.

For its part, gold ended the year with a slight loss of 0.19% to quote at 1,826.20 dollars per ounce, due to the fact that the precious metal lost its attractiveness as a refuge asset due to the increases in interest rates and the strength of the US dollar.

sebastian.diaz@eleconomista.mx