Analys
EU sanctions on Russian alu will likely drive EU premiums higher

The LME 3mth alu price has bounced 4.5% past two days but its a far cry from 2022 impacts. The 3mth aluminum price has bounced 4.5% (+96 USD/ton) to USD 2256.5/ton on news that the EU is considering an embargo on Russian aluminum. It’s a notable gain amid an otherwise lukewarm and bearish energy complex where natural gas and coal prices have been trending steadily lower since October last year. But it is nothing compared to what happened in 2022 when Russia attacked Ukraine. The 3mth aluminum price then rallied to USD 3849/ton and the EU aluminum premium rallied to USD 505/ton versus a more normal USD 100/ton. Thus so far the the price action in aluminum is nothing like what we experienced in 2022.

It looks likely to us that the EU will indeed impose sanctions on Russian aluminium. We don’t know yet if the EU actually will implement sanctions on Russian aluminum. Personally I think its likely that they will do it as it is kind of a moral stand and the last large piece of the Russian energy complex which is possible to place under sanctions. But the actual effects both on the EU and Russia will likely be limited. Russia will not stop producing and exporting aluminium. Rather it will export it and send it elsewhere in the world. That is what happened to Russian crude and product exports. They weren’t lost in terms of global supply, but rerouted elsewhere.
New sanctions will have limited effect on Russia and dissipate over time. It’s a moral stand. Previously it was possible to enforce effective sanctions on one specific country. Those were the days when the US ruled the world and China chose to side with the US. For example with sanctions on Iran. These sanctions have not at all been lifted yet. But Iranian oil exports have rebounded from 1.9 m b/d at the low in 2019 to now 3.2 m b/d as China now is accepting to import Iranian crude oil and is placing less emphasis on the US.
The effect of sanctions have a tendency to deteriorate over time. Even when the US ruled the world and China played along. But sanctions today will leak massively if China isn’t playing along with what the EU and the US wants. And China isn’t playing along.
The goal is to hurt Russia’s income from aluminum exports. But the effect will be limited. The aim with the sanctions towards Russian oil, and now possibly also aluminum, isn’t to bar the supply from the global market. Rather the opposite. Neither the US nor the EU wants to put a stop to Russian raw materials exports as it could drive up the price of these globally which would hurt consumers and generate inflation. The aim is to keep exports flowing but to try to hurt Russian earnings from the exports. The same will likely be the case for the potentially upcoming EU sanctions on aluminum.
But even the ”hurt the income” strategy with a cap on the price of Russian crude and products has deteriorated over time. Russian Urals crude had a discount to Brent crude in 2022 of as much as USD 36/b and today it is only USD 12/b below Brent.
Russia has probably made contingency plans a long time ago. Russia has also probably made contingency plans for its aluminum exports as the risk has been there all along since 2022. Thus new EU sanctions towards Russian aluminium exports will likely be less of a shock today versus when all hell broke lose in 2022.
Europe has also already reduced its Russian imports of primary aluminium, to about 10% of its primary needs. A large proportion of imports are now increasingly coming from middle eastern producers.
EU alu premiums already rising along with Mid-East issues (Red Sea). Will rise further with sanctions. Issues in the region has pushed up freight costs, insurance costs and added transit delays and length of journey to Europe. A combination of these issues have already lifted the European premium. New sanctions on Russia will likely lift the regional premiums further.
The dirty details. How deeply is EU’s industrial supply chains embedded in Russian alu semies? The actual effects of new EU sanctions on Russian aluminum will be down to the dirty details. An important question is how deeply Russian semies, and prefabricated aluminum parts (which also looks to be sanctioned) are embedded and integrated in the European industrial system (supply chains). If the EU is deeply dependent of pre-fabricated aluminum parts from Russia, then it could be painful for EU to disentangle from these imports.
Sanctions = additional costs and frictions as global aluminum flows are rerouted. New sanctions will naturally lead to frictions and some added price due to that. Aluminum can of course be transported across the world. It is cheaper to transport it from Russia to Europe and that is why it historically has landed in the EU. But, if need be, due to possible EU sanctions towards Russia on aluminum, then Russia can and will send its aluminum to other global regions, maybe and possibly predominantly, to China. Then the EU can and must import more aluminum from other places instead. Probably the middle east and maybe from China
The Global LME 3mth price will likely rise only marginally as no supply is actually lost. Just rerouted. The price of aluminum across the world may increase a little bit due to such sanction-frictions but probably not all that much since there will not be any loss of supply and only added transportation frictions and costs.
EU aluminum premiums will naturally rise in order to attract non-Russian supply from further away. EU Alu-premiums should naturally increase in order to attract aluminum from further away. China will probably be able to import Russian aluminum on the cheap. So Russia will lose some income on its aluminum exports as it potentially has to cover transportation costs all the way to China and possibly an additional discount in order for China to take it. China may only import a lot of Russian aluminium if it can get it on the cheap. China can then export more as its country balance will improve and possibly export all the way back to Europe.
A weak macro-backdrop in Europe makes sanctions easier. The backdrop to all of this is very weak aluminum demand in Europe amid a bleak macro-picture. Disruption of Russian supply to the EU should thus be less painful than it otherwise would have been.
What to do with Russian alu stocks already in EU LME storage? Consume it or export it? A tricky question is what to do about all the Russian aluminum which currently is sitting at EU LME storage sites where it is constituting some 90% of aluminum stocks. If it has to leave EU LME storage sites due to sanctions then it may have to be sold at a discount in order to get it to flow elsewhere. Maybe it will create deep front-end contango is one speculation. A natural solution however would be that sanctions allows consumption of Russian aluminum currently in stock in the EU but bans new and further stocking of Russian aluminum. Then these Russian stocks would gradually be consumed and dissipate and instead gradually be replaced by non-Russian aluminum.
”Futures market can tighten quickly and spreads could rally.” The following is a comment from one of SEB’s metals traders: ”The futures market could get very tight very quickly following EU sanctions on Russian aluminum. Spreads could tighten aggressively until market reaches a new balance.”
The LME 3mth aluminum price rallied to USD 3,849/ton when Russia attacked Ukraine. Price has now gained a little (+4.5%) to USD 2,254/ton on possible EU sanctions.
Aluminum premiums across the world. EU premiums rallied to USD 505/ton and USD 615/ton (duty unpaid and paid resp.) in 2022 vs normal USD 100-150/ton. Now gained a little on Mid-East troubles and rerouting. Could rise much more on EU sanctions.
Russia probably has a normal, net export of alu semies and primary alu of around 3 m mtpa. This would normally be destined to Europe.
Analys
Brent crude is now trading below its nominal 2018-19 average in EUR/barrel terms

Brent crude gained a meager 0.65% yesterday with a close of USD 66.55/b. That was not much given that US equity markets rallied 2% yesterday with Nasdaq now is almost back to its pre ”Liberation Day” level. Brent crude is trading unchanged this morning with little impulse to do anything it seems.

Equity markets have gotten a boost along with easing US tariff rhetoric. The Brent crude oil price has however not gotten the same rebound and is today still trading USD 8.5/b lower than its USD 75/b level from 2 April.
Two factors at hand here: Expectations of softer growth and more oil from OPEC+. One is that global growth in 2025 will still take a hit with softer growth and thus softer oil demand growth due to the US tariff-turmoil. Even if rhetoric has eased. The second is that OPEC+ has upped its production plans with a softer market as a result going forward. The latter message to the market happened almost at the same time as the ”Liberation Day” on 2 April.
Spot market still as tight as it was on 2 April. Still, the front-end market is more or less equally tight today as it was on 2 April. The average Brent, WTI and Dubai 1-3mth time-spread is USD 1.4/b today versus USD 1.5/b on 2. April.
The market setup/pricing is thus that the market is still tight, but that surplus will come. Either because global growth will slow due to US Tariff-turmoil or because OPEC+ will add more barrels.
Will OPEC+ resolve its internal quarrels? Worth remembering on the latter is that the latest more aggressive OPEC+ production growth plan is due to internal quarrels over quota breaches by Iraq and Kazakhstan. OPEC+ could potentially ease those growth plans just as quickly if the internal quarrel is resolved.
Brent crude in EUR/barrel is now trading at the nominal level from 2018-2019. That is nominal! Not taking account of any kind of inflation which cumulatively is up 20-30% since primo 2018. The average, nominal Brent crude oil price in 2018-2019 was EUR 59.1/b. The front-month Brent crude oil price is now EUR 58.4/b. And Brent forward 36mth is only EUR 55.5/b and in real terms one could subtract some 5-10% for the next three years from that nominal forward price. Quite sweet for consumers!
Brent has rebounded along with equities (here US Russel 2000 index in orange), but the rebound in oil has become more hesitant the latest days. Brent still trading USD 8.5/b below its pre ”Liberation Day” of USD 75/b
Brent crude forward curves. Today versus 2 April (’Liberation Day’). Still a tight current market but now with expectation that surplus is coming.
The Brent crude oil price versus the average Brent, WTI and Dubai 1-3mth time-spread. The latter is today on par with where it was on 2 April while the Brent 1mth price is down USD 8.5/b.
Brent crude in EUR/b is down to its 2018-2019 nominal price level. Not bad for euro-based oil consumers!!
Yearly averages for Brent crude in EUR/barrel. The Brent 1mth in EUR/barrel is today trading below its nominal average from 2018-2019 of EUR 59.1/b. And 36mth forward Brent is trading at only EUR 55.5/b. And that is nominally both ways. Add in some 20-30% inflation since primo 2018 and 5-10% additional inflation next three years. Think real terms!
Analys
OPEC+ tensions resurface: Brent slides to $66.6

Brent crude prices have lost the positive momentum seen from Monday evening through midday yesterday. The price initially bottomed out at USD 65.7 per barrel on Monday afternoon, before climbing steadily by USD 3 to USD 68.7 on Wednesday morning. However, that upward momentum quickly reversed course. Brent tumbled nearly USD 3.4, hitting a weekly low of USD 65.3 per barrel before recovering some losses. As of this morning, it trades at USD 66.6 – a reflection of continued and substantial volatility.

Market fundamentals have largely remained in the background, with tariff rhetoric still dominating headlines. However, yesterday’s drop was clearly driven by the supply side of the equation, after reports emerged that several OPEC+ members are pushing for an accelerated oil output increase in June.
The timing of this move – amid global trade uncertainty and softening demand – may seem counterintuitive. But internal rifts within OPEC+ appear to be taking precedence. In May, Saudi Arabia already surprised the market with an output hike aimed at disciplining quota violators. That move failed to restrict Kazakhstan, the group’s largest overproducer, and has now triggered discussions of yet another sizeable production boost in June.
A later statement from Kazakhstan’s energy ministry, pledging renewed compliance, may have helped lift crude prices slightly this morning.
The next OPEC+ meeting is set for May 5, with the proposed June output hike expected to top the agenda. The group will likely choose between a scheduled, incremental increase of 138,000 barrels per day, or a more aggressive jump of 411,000 barrels per day – equivalent to ish three months’ worth of increases rolled into one. The latter scenario would put downward pressure on oil prices and highlight deepening tensions within OPEC+, while also exacerbating concerns in a market already clouded by weak demand expectations.
Although the final decision on volumes remains unclear, OPEC+ has demonstrated it still has pricing power, and that it can pull prices lower quickly if it chooses to do so.
________
US DOE DATA
U.S. refinery activity picked up in the week ending April 18, with crude inputs rising by 326,000 barrels per day to a total of 15.9 million. Utilization rates also climbed to 88.1%. Gasoline output strengthened to 10.1 million barrels per day, while distillate fuel production edged lower to 4.6 million.
Crude imports declined by 412,000 barrels per day to 5.6 million last week. Over the past month, import volumes have averaged 6.1 million barrels per day – down 6.8% compared to the same period a year ago. Gasoline and distillate imports came in at 858,000 and 97,000 barrels per day, respectively.
Inventories were mixed. Crude oil inventories (excl. SPR) rose slightly by 0.2 million barrels to 443.1 million, still 5% below the five-year average. Gasoline inventories posted a sharp draw of 4.5 million barrels and are now 3% under seasonal norms. Diesel inventories dropped by 2.4 million barrels, leaving levels 13% below the five-year average. Propane inventories rose by 2.3 million but remained 7% under typical levels. Total commercial petroleum inventories saw a net decline of 0.7 million barrels on the week.
Product demand was generally stable. Total products supplied averaged 19.9 million barrels per day over the last four weeks, up 0.4% year-on-year. Gasoline demand slipped by 0.4%, while distillates and jet fuel rose sharply, by 12.8% and 13.8%, respectively.


Analys
Nam, nam, nam. Give me more 36mth forward Brent crude in EUR/barrel

Brent carried higher by relief rally across markets as Trump backs away from sacking Powel. Brent crude rose 1.8% ydy to USD 67.44/b with an intraday high of USD 68.04/b. The gain was driven by a relief rally across markets as it became clear that Trump would not try to force out Powel from his role as chair of the US Fed. US equities rallied more than 2.5% as a result and pulled oil along upwards in relief. The gains continue this morning both in equities and oil with the latter up 1.2% to USD 68.25/b.

Forward oil in euro looks very appealing for consumers. Even after recent oil price gains. A weaker USD and a lower oil price at the same time recently has strongly lifted the appeal for oil purchases by non-US denominated oil consumers. The euro has rallied against the USD. On Monday Brent closed at EUR 57.57/b while the 3yr forward Brent price closed at a nominal EUR 53.95/b when the forward fx rate is applied. But this is nominal three years forward basis. If we also assume that Eurozone inflation will average 2% pa. for the next three years, then the real forward euro price for oil is even lower. The price for Brent crude today is EUR 60.1/b for the front-month while the 36mth contract is EUR 55.1/b when the forward eurusd rate of 1.2 is applied. If we also assume a 2% annual inflation for three years then the real forward price is only EUR 51.9/b. Compare this to the average nominal price of Brent crude from 2015 to 2019, the shale oil boom-years, when Brent crude only averaged USD 58.5/b and EUR 51.3/b. This period was the tragic oil-years when US shale oil companies were chasing volumes rather than profits with many of them going bankrupt as a result. Even after the recent rally in Brent crude oil prices, the forward 36mth price in EUR is still relatively cheap in historical terms and especially so when the 36mth real forward price is taken into account.
The 36mth real forward price for Brent crude in EUR/b is almost down to the ”valley of death” period from 2015 to 2019 when Brent crude nominally averaged USD 58.5/b and EUR 51.3/b. That was the period when US shale oil producers aimed for volume over profits which led many of them to bankruptcy.

-
Nyheter4 veckor sedan
Danska Seaborg Technologies siktar på serieproduktion av smältsaltsreaktorer till mitten av 2030-talet
-
Analys4 veckor sedan
Brent Edges Lower After Resisting Equity Slump – Sanctions, Saudi Pricing in Focus
-
Nyheter3 veckor sedan
Oljepriserna slaktas på samtidiga negativa faktorer
-
Nyheter4 veckor sedan
Guld kostar över 3100 USD per uns och 1 miljoner kronor per kilo
-
Analys3 veckor sedan
Tariffs deepen economic concerns – significantly weighing on crude oil prices
-
Nyheter3 veckor sedan
Två samtal om det aktuella läget på råvarumarknaden
-
Analys4 veckor sedan
Crude inventories fall, but less than API signal
-
Analys3 veckor sedan
Lowest since Dec 2021. Kazakhstan likely reason for OPEC+ surprise hike in May