Commodities: Global
OPEC Oil Output Fell Slightly in April per Reuters reflecting lower exports from Iran, Iraq and Nigeria. Output fell by 0.1 million barrels per day (mbpd) from March to a total 26.5 mbpd. OPEC+ agreed to maintain
their 2.2 mbpd output cuts through June. The Saudis also held their voluntary additional cut of 1.0 mbpd through the same date. Russia pledged to hold their crude oil and fuel export cuts by a combined 0.5 mbpd, and more damage from Ukrainian attacks on refineries made this a certainty. However, Iranian oil still found its way to China, reportedly smuggled under Malaysian-flagged ships, and to India. Iran oil exports hit a 6-year high as West prepared additional sanctions over attacks on Israel and international shipping via the Houthis. While Israel sent missiles Iran, the minimal damage by it and the Israeli retaliation put an end to direct conflict, perhaps temporarily. However, fighting in Gaza continued and Israel rejected the latest proposal by Hamas to return about 25% of the hostages, dead or alive in exchange for a cease fire. Not over yet.
US March Oil Production held at 13.1 mbpd as operating oil rigs remained the same at 506 as of March 29th and April 26th. Per AAA, US average regular unleaded
gasoline prices continued higher to $3.66 (+12¢) as of the end of the month. California prices increased +27¢ to $5.17 per gallon for regular unleaded. The Biden administration has halted plans to buy more oil for the depleted strategic reserve, as incremental as that has been so far. It also moved to restrict future supply by preventing oil development across more than half the government’s mammoth reserve in Alaska and increased fees and capital requirements for new drilling leases (some of which fees have not been updated since 1960). Domestic production’s importance was outlined in the graph to the left – the US still imports over 8 mbpd but that is to perfect the blend for refining gasoline and other products. Most of the imports (over 60%) are from Canada and Mexico so all within North America.
Global Net Coal-Power Capacity grew at the fastest pace since 2016 last year, led by a surge in new plants in
China and a slowdown in retirements elsewhere. The world’s coal fleet grew by 2% to 2,130 gigawatts, with China accounting for about two-thirds of the increase, according to a climate research firm. When will China be held to the same pollution standards as the rest of the world? China’s gold consumption in the first quarter of 2024 climbed by +6% from a year earlier on soaring safe-haven demand, the country’s Gold Association said. Bullion consumption in the world’s largest consumer totaled 309 metric tons in the first three months of the year. China, the biggest producer and consumer of the precious metal, mines more gold than any other country, but still imports a lot. Overseas purchases were +34% higher during the first quarter, compared with a year earlier. Gold futures trading on the Shanghai Futures Exchange now rivals the New York and London exchanges with long gold positions equal to 295,233 contracts, or 295 tonnes of gold.
US Department of Agriculture weekly crop progress report at the end of April showed 49% of the U.S. winter wheat crop rated in good-to-excellent condition, down a percentage point from last week but still the highest for this time of year since 2020. US farmers were off to a strong start planting corn and soybeans this season, with the soy pace at almost double the acres usually completed at this time. Prices for both crops hovered near three-year lows as global supplies swelled from rising South American harvests and slowing demand from top importer China. Wet weather and disease in Argentina hit that county’s corn exports by about 10%, a financial blow to the third-largest corn exporter in the world. However large inventories minimized the impact.
Top Cocoa Producers Ivory Coast and Ghana, in the midst of one of their worst harvests in decades, do not have beans available to fulfil deliveries of up to half a million tons already sold, two industry sources told
Reuters. The beans make up about 20% of the countries’ joint output and the aim now is to deliver them next season to the buyers instead of during the current season. Hopefully it will not be the fourth bad season in a row as seen right.
In unusual news, the US lost more than 30 gigawatts of solar energy during April’s total eclipse — roughly the output of 30 nuclear reactors — as sunlight was blocked during prime generating hours. The Texas power grid was affected the most, losing about 17 gigawatts!
Second, Australian grape farmers destroying vineyards as global wine glut persisted. Bloomberg reported that grape-grower Tony Townsend destroyed half his 14-hectare vineyard last year. The fields were healthy and vibrant, but he estimates he would have lost about A$35,000 ($23,000) to harvest them. Though global production hit a 60-year low in 2023, a wine glut is persisting, signifying that demand is falling even faster. Fortunately China proposed lifting punitive tariffs on the nation’s wine, signaling the end is near to a three-year trade dispute as both countries seek to strengthen ties. In the meantime, send it here!
In the final item of unique commodity news, the last surviving Hunt brother of the 1980 silver squeeze fame died at the age of 95 on April 9th. Buying in the 70s at 1.50 an ounce, the Hunts (Herbert and his brother Bunker) controlled more than 100 million ounces (two-thirds of a year’s supply) at their peak at a price around $50. After prices crashed to $10.80 on March 27th, the brothers were forced to liquidate, and faced a decade of litigation, paying over one hundred million dollars in fines and penalties. The concept inspired “Trading Places,” one of the finest comedies on film and a multitude of conspiracy theories. The third brother unrelated to the scheme, Lamar Hunt, helped create the American Football League, founded the Kansas City Chiefs and coined the name SuperBowl. Today, silver is priced in the $27 range.
All the best in your investing!
David Burkart, CFA
Coloma Capital Futures®, LLC
www.colomacapllc.com
Special contributor to aiSource