- Energy: EIA increases supply estimates for 4Q23
- Metals: Peru copper output rises
- Agriculture: Coffee quality premium shrinks
Energy: EIA increases supply estimates for 4Q23
Crude oil prices retreated yesterday, giving up all the gains of the past three to four sessions, with ICE (NYSE:ICE) Brent falling below US$73/bbl while NYMEX WTI dropped to around US$68/bbl. Higher crude oil exports from Russia, EIA’s upside revision for 2023 supply from the US and demand concerns continued to weigh on market sentiment. Stronger economic data from the US also pushed up expectations of higher-for-longer Federal Reserve interest rates, which have weighed on demand estimates in the near term.
In its monthly Short-Term Energy Outlook, the US Energy Information Administration (EIA) revised up crude oil production forecasts for the current year to 12.93MMbbls/d compared to last month’s 12.9MMbbls/d largely on the expectation of stronger supply growth for 4Q23. For the current quarter, the EIA estimates domestic crude oil production at 13.26MMbbls/d compared to earlier estimates of 13.17MMbbls/d. However, the administration has revised down domestic production estimates from 13.15MMbbls/d to 13.11MMbbls/d for 2024. Domestic oil consumption estimates were left unchanged at 20.1MMbbls/d for 2023 and 20.4MMbbls/d for 2024.
Meanwhile, the American Petroleum Institute (API) reported that US crude oil inventories decreased by 2.35MMbbls over the last week, a larger drawdown compared to market expectations of around 1.5MMbbls. However, Cushing crude oil stocks are reported to have increased by 1.4MMbbls. On the products side, API reported that gasoline and distillates inventories also increased by 5.8MMbbls and 0.3MMbbls respectively, over the week ending 1 December. The more widely followed EIA report will be released later today.
Metals: Peru copper output rises
Peru’s recent official numbers show that copper output in the nation rose 1.9% year-on-year (+2.1% month-on-month) reaching its year-to-date highs of 240kt in October. It is reported that output gains from mines like Antapaccay (+35.5% YoY), Hudbay Peru (+8.7% YoY) and Southern Peru Copper Corporation (+6.6% YoY) primarily contributed to Peru’s overall copper production growth in October. Cumulatively, copper production grew 14.3% YoY to 2.25mt in the first 10 months of the year. Among other metals, zinc production in the nation rose 10.4% YoY to 127kt in October.
As for lead, the LME on-warrant stocks fell by 11,575 tonnes (the biggest daily decline since 20 November) after rising for five straight sessions to 88,275 tonnes as of yesterday, according to the latest data from the exchange. The decline was driven by Singapore warehouses. Meanwhile, exchange inventories fell by 1,950 tonnes for a second consecutive day to 128,900 tonnes as of yesterday, the lowest since 1 November. Looking at the cash/3m spread for lead, the existing contango tightened to US$35.5/t as of yesterday, compared to a contango of US$41/t a day earlier.
Meanwhile, recent data from the China Iron and Steel Association (CISA) shows that steel inventories at major Chinese steel mills rose to 14.1mt in early December, up 8.8% compared to late November. Meanwhile, crude steel production at major mills fell by 4.2% from late November to 1.93mt/d in early December, as mills struggled with shrinking margins.
Lastly, the latest LME COTR report released yesterday shows that investors decreased net bullish positions for copper by 5,457 lots (after reporting additions for three consecutive weeks) to 52,097 lots as of last Friday. Similarly, net bullish bets for aluminium also fell by 19,004 lots for a second consecutive week to 96,909 lots, whilst money managers decreased net bullish bets in zinc by 6,341 lots for a second straight week to 26,246 lots in the week ending on 8 December.
Agriculture: Coffee quality premium shrinks
Arabica's premium over Robusta coffee has increased to around US¢70/lb this month as supply concerns from Brazil supported prices. Tight supplies have been supporting coffee prices over the past few months, especially for Arabica, as Brazilian supplies dwindle. Earlier, Cecafe also reported that Brazilian Arabica exports declined for the season while Robusta exports increased. Robusta prices also jumped recently due to tighter exports from Vietnam on account of lower domestic inventories; however, price gains for Robusta were relatively smaller than Arabica.
Sugar prices have been on a declining trend given the improved supply prospects from Brazil and India. The latest fortnightly report from UNICA shows that sugar cane crushing in Centre-South Brazil rose to 23.9mt, up 46.1% year-on-year in the second half of November. The cumulative sugar cane crush for the season increased by 15.9% YoY to 619.3mt. Sugar production rose 35% YoY to 1.4mt in the second half of November, with 46.5% of cane allocated to sugar production in the fortnight, lower than the 47.6% allocated in the same period last year. Cumulative sugar output so far this season stands at 40.8mt, up 23.5% YoY. Earlier, India had asked sugar mills not to divert sugar cane juice for ethanol production. The measure could help increase India’s sugar production by around 2mt and help fill the supply gap.
Weekly data from the European Commission shows that soft wheat shipments from the EU fell 14% YoY and reached 13.6mt as of 10 December, down from 15.8mt for the same period last year. Morocco, Nigeria, and Egypt were the top destinations for these shipments. Meanwhile, EU corn imports continued to fall and stood at 7.6mt, down 43% compared to a year ago due to higher domestic output.