Energy – Oil continues its recovery
Oil prices continued their move higher yesterday. ICE Brent settled more than 1.9% higher on the day, leaving it within striking distance of $72/bbl. Supply disruptions from Hurricane Francine continue to provide some support. The latest data from the Bureau of Safety and Environmental Enforcement shows that 41.74% of US Gulf of Mexico oil production has been shut in due to the storm. More than 53% of natural gas production has also been shut in.
The IEA’s monthly oil market report yesterday painted a bearish picture. The IEA estimates that global oil demand grew by just 800k b/d in the first half of the year and now expects global oil demand to grow by 900k b/d in 2024. China has been the key driver in this slower demand growth. The IEA estimates that Chinese demand fell YoY for a fourth consecutive month in July, declining by 280k b/d. The IEA expects China’s oil demand to grow by just 180k b/d this year. The only supportive numbers in the report were inventory numbers. The IEA estimates that oil inventories declined by 47.1m barrels in July and preliminary numbers suggest a further decline in August. Obviously, with the expectation that the market returns to a sizeable surplus in 2025, these draws will not last.
US natural gas prices rallied yesterday. The front-month Henry Hub contract rallied by more than 3.8% after US natural gas storage increased by less than expected. EIA data shows that storage increased by 40 Bcf over the last week, below expectations for a 48 Bcf increase and the 5-year average of a 67 Bcf increase.
Agriculture – US corn stocks fall
In its latest WASDE report, the USDA revised up its US corn production estimates by 39m bushels to 15.19bn bushels on better yields. However, 2024/25 beginning stock estimates were lowered by 55m bushels to 1,812m bushels following increased exports and corn use for ethanol in 2023/24. As a result, ending stock estimates were revised down by 16m bushels to 2,057m bushels. This was still above market expectations of around 2,033m bushels. For the global market, the agency lowered 2024/25 ending stock estimates by 1.8mt to 308.4mt.
The USDA revised down its 2024/25 US soybean production estimates by 3m bushels to 4.59bn bushels, broadly in line with market expectations. Consumption estimates were also increased by 2m bushels to 2,541m bushels. As a result, 2024/25 ending stock estimates were lowered by 10m bushels to 550m bushels. Looking at the global soybean balance, 2024/25 global ending stocks were increased marginally from 134.3mt to 134.6mt.
For wheat, the USDA kept its domestic ending stocks estimates for 2024/25 unchanged at 828m bushels, while for the global balance, ending stocks increased marginally from 256.6mt to 257.2mt
Source: ING