Friday, December 15,
2017 /11:55AM / FDC
Commodities market Imports
Brent crude prices stayed above the $60pb threshold through the month of November. This was primarily driven by tightening crude supplies, improved global crude demand, decline in global crude stockpiles, rising geopolitical tensions and expectations of an extension of OPEC’s output cut deal.
During the period, prices rose to a two year high of $64.27pb (the highest since July 2015) on November 6th as the anticorruption purge of several Saudi Arabian officials and royal family members raised expectations of Saudi support for extending OPEC cuts. Additionally, renewed tensions in the Niger Delta region which threatened Nigerian production also supported prices.
on November 16th, Brent crude prices took a downward plunge by 4.52% to
$61.36pb on November 16th, the lowest in the month of November, before rising
to $63.57pb at the end of the month. This was mainly driven by fears of rising
US shale output and the International Energy Agency (IEA) lowering its outlook
for demand growth in 2017/18 due to the warmer than expected winter period.
Average Brent crude price was $62.87pb, 9.05% higher than October’s average of
OPEC and Non-OPEC members met at Vienna, Austria on November 30th to discuss progress, the possibility of an extension in production cuts and a possible exit strategy to minimize the likelihood of oil producers flooding the market after the deal’s expiry. In a bid to curb global oil glut and increase prices, members decided to extend production cut agreement through to the end of 2018.
We maintain cautious optimism for oil prices, as higher oil prices create incentives for increased US shale production. US shale inventory levels continue to pose a threat to the effectiveness of OPEC cuts.
According to the oil cartel, OPEC, Nigeria’s domestic production declined by 9.5% to 1.738mbpd in October from 1.792mbpd in September. This was driven by force majeure as domestic upstream oil companies slowed production due to inventory buildup caused by cargo delays. Oil exports in October also slid, as Asian refiners (primarily Taiwan and China) increased their demand for more U.S. crude.
There has therefore been a buildup of excess cargoes as some tenders failed to clear Novemberloading crude. OPEC revised September’s production level to 1.79mbpd from 1.855mbpd, and August’s production to 1.802mbpd from 1.804mpd.
Oil production is expected to remain flat around current levels of 1.73 – 1.8mbpd in the coming months due to OPEC’s decision to maintain the cap on Nigeria’s production at 1.8mbpd.
Natural Gas traded at an average of $3.05/MMBtu in November. This represents a 4.81% gain in prices compared to the corresponding period in October. This was largely driven by rising demand due to cooler weather (winter season) and rising U.S. LNG exports. Additionally, production challenges in Indonesia bolstered prices.
fell to the lowest on Nov 24th at $2.81/MMBtu due to expectations of increased
global supply before closing at $3.03/MMBtu.
Natural Gas prices are expected to post stronger gains in coming weeks as cooler weather persists.
Cocoa prices strengthened during the period to reach an average of $2,119/mt in November, 1.63% higher than the previous month. Gains were driven by increased demand from Asia and expectations of lowerthanexpected output in Ivory Coast due to wet weather conditions. However, cocoa prices closed lower in November due to favorable weather conditions in Ivory Coast and rising global inventories. Prices reached a 10month high of $2,201/mt on November.
Cocoa prices are expected to increase as demand for chocolate picks up in emerging markets and global supply is expected to drop to approximately 50,000metric tons.
Commodities market Imports
prices closed at $4.33/bushel, 3.47% higher than $4.19/bushel in October.
However, average wheat prices fell by 0.46% to $4.33/bushel from $4.35/bushel.
Wheat harvesting which led to record global supplies (particularly from
Russia), weak U.S. exports at 199,845tons below expectations (350,000 –
550,000tons) and a stronger U.S. dollar, depressed prices.
We expect wheat prices to decline further as Russia is expected to produce the second largest bumper harvest in 2018 (76.7mn tons).
prices averaged $3.50/bushel in November, 0.24% higher than the average of
$3.49/bushel in October. Dry weather conditions in Argentina, delay of corn
harvesting in the US and a decline in global supply bolstered prices.
Corn prices are expected to be bearish in the coming months driven by ample supply glut as producers compete to gain market share of the increasing Asian demand. The U.S. Agriculture Department (USDA) raised its estimates for corn plantings by 0.6mn acres, corn stocks by 0.12bn bushels and corn production to 14.52bn bushels.
Sugar prices maintained a bullish trend in the month of November. Sugar prices averaged $0.1496/pound in November, 5.13% higher than the average of $0.1423/pound in the previous month. This was due to an increase in global demand in anticipation of the festive season.
reached a high of $0.1539/pounds and a low of $0.1423/pound.
Sugar prices will remain bullish in the coming month on increased festive demand.