Commodities Market Update: Decrease in Risk Appetite

Petroleum

The commodity market has been affected by the fallout of the SVB crisis, resulting in many areas of the industry facing challenges. Today's release of the US CPI data is significant for investors because it could offer clues on how the Federal Reserve may act during their upcoming meeting.

The oil industry was affected by the broader risk-off movement that resulted from the fallout of the SVB collapse. Yesterday, ICE Brent briefly dropped below US$80/bbl, its lowest point since early January. However, the market later regained some of these losses and ended up settling above US$80/bbl. The recent increase in market volatility may continue for a while, especially with the release of US CPI data today. This data should provide some insight into what decision the Fed might make at their next FOMC meeting, but there is still a lot of uncertainty regarding Fed policy due to recent events.

Today, OPEC is set to release its newest report on the oil market. The report will contain updated predictions for the supply and demand of oil for the remainder of this year. In their previous report, OPEC anticipated that global oil demand in 2023 would increase by 2.32 million barrels per day compared to the previous year, with an average of 101.87 million barrels per day. Additionally, OPEC projected that non-OPEC supply would grow by 1.44 million barrels per day compared to the previous year for a total of 67.01 million barrels per day. According to the report, OPEC production is expected to be 29.42 million barrels per day in 2023.

The Willow oil project in Northwest Alaska, which is worth $8 billion, has been given the green light by the Biden administration. The project's capacity is expected to be around 180 million barrels per day, says Bloomberg. ConocoPhillips can now utilize three well pads, which is lower than its initial request of five.

After strong gains in the European natural gas market last week, prices fell significantly yesterday with TTF dropping by nearly 6.2%. This drop came with increased wind power generation and expectations of milder weather in some northern areas of Europe. These factors likely softened worries over recent energy disruptions in France. Even though EU gas reserves are at a comfortable level of more than 56% full, any changes in supply and demand could cause the gas market to react strongly.

The value of gold is increasing once more, after Silicon Valley Bank failed. This has lowered predictions for the US Fed to make further increases. Fear of spreading contagion means that gold is likely to remain in high demand over the next few weeks. Additionally, essential information about US inflation will be closely watched today for hints about the course the Fed may take with interest rates.

MMG has announced that copper concentrates transportation has restarted and their Las Bambas mine is running at full capacity again. This means that the mine can finally start to reduce its stockpile of copper concentrate that was held on-site due to problems with logistics. The company emphasized its dedication to coordinating closely with communities along the Southern Road Corridor so as not to encounter any problems in the future with the supply and logistics of exporting.

Yesterday, the CEO of Rio Tinto announced that the Oyo Tolgoi project in Mongolia has commenced production. This project is set to become the fourth largest copper source in the world by 2030 and is capable of producing up to 500,000 tonnes of copper annually.

The most recent information from Ukraine's Ministry of Agriculture reveals that grain exports for the 2022/23 season have reached 34.2 million tonnes as of March 13, a 24 percent decrease compared to the previous year. Corn shipments totalled 19.9 million tonnes, down 2 percent year-over-year, while wheat exports fell 36 percent to 11.9 million tonnes. The current agreement for the Black Sea Grain Initiative is set to expire on March 18, and negotiations are taking place to extend it. Despite a willingness from all parties to prolong the deal, Russia is reportedly only seeking a 60-day extension, as opposed to the customary 120-day period. A shorter extension could lead to greater uncertainty in the grain markets.

According to the latest USDA weekly export inspection data until 9th March, there was a steady demand for US corn and soybeans, but less demand for US wheat. The inspections showed that the US weekly export inspections of corn increased to 999.4kt from the previous week's 933.3kt, but slightly lower than the 1,146.8kt reported last year. Similarly, inspections of US soybeans rose to 618.8kt, which is higher than the previous week's 552.4kt, yet lower than the 798.7mt reported a year ago. Unfortunately, the inspections of US wheat exports decreased to 249kt, compared to 341.1kt in the previous week and 307.6kt a year ago.

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