As predicted the ASX is flat today. The S&P/ASX200 gained 12.6 points or 0.17% to 7,350.6, crossing above its 20-day moving average.
Over the last five days, the index has gained 0.50% and is currently 2.90% off of its 52-week high.
The top-performing stocks were Lake Resources NL (ASX:LKE, OTCQB:LLKKF) and Boral Ltd, up 21.21% and 8.35% respectively.
Looking at the sectors, Energy is up 2.20%, which is no surprise after petrol prices skyrocketed over 40 cents across the country overnight. Saudi and Russian production cuts have impacted the market as US demand grows. However, China's slowdown and possible dampening demand are offsetting some of the price gains.
A potential supply shock caused by threatened strike action at Australian production facilities owned by Woodside and Chevron (NYSE:CVX) may also be having an impact.
"With industrial action at Shell’s Prelude Floating LNG facility lasting 76 days last year, gas markets are 'justifiably worried' that industrial action at LNG facilities operated by Chevron and Woodside may face a similar outcome if union talks fail to deliver an agreement,” said CBA's director of mining and energy commodities research Vivek Dhar.
According to ship‑tracking data, last year North West Shelf, Pluto, Gorgon and Wheatstone LNG plants accounted for 12% of global LNG exports.
"With the northern winter season (October 1 to March 31) fast approaching, any sustained outage at these facilities threatens to meaningfully tighten traded gas markets," Dhar said. "The winter season in the northern hemisphere typically sees the largest increase in gas usage in the year."
The EU’s gas stockpiles could save the day. Europe’s gas storage levels at 87% of capacity at August 6, are well above the 5‑year average (2018‑2022) of 73% for this time of year.
"The ample headroom means that Europe is most likely to enter the winter season with more than enough gas. Europe has been able to mitigate the impact of lower Russian gas pipeline imports this year by increasing LNG imports and reducing gas use."
Back to the sectors, Real Estate at 0.41% higher just nudged out Health Care (0.40%) as the next best performed.
The biggest loser was Information Technology down 1.92%, followed by Utilities which lost 0.82%.
Inflation fears over soaring energy costs
Supply disruptions and tight markets are causing heightened anxiety around further interest rate rises.
US oil prices jumped above $US84 a barrel, breaking through their April highs and reaching the strongest level in nearly nine months.
“Commodities are experiencing a global downturn in demand, but we may not get the same disinflation that we’ve seen in previous downturns because there is a collection of supply constraints that are holding up commodity prices,” said HSBC’s chief economist for Australia Paul Bloxham.
“This super squeeze we’re seeing in the commodity space is going to be a contributor to the sticky inflation challenge that central banks are facing.”
HSBC believes that central banks will not cut rates any time soon and the Reserve Bank of Australia (RBA) may raise rates again due to persistently high raw material prices.
Meanwhile, ANZ maintained its year-end price target of $US100 a barrel for Brent crude – a 14% upside from current levels, while National Australia Bank is looking at an average $US94 a barrel in the fourth quarter.
Westpac senior economist Justin Smirk said, “We’ve got oil prices rallying through next year and while we still see inflation coming back, there’s definitely a risk that inflation could prove more sticky than people anticipate.”
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The S&P/ASX Small Ordinaries is 0.59% higher on a quiet news day.
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