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Commodity Tracker: 5 charts to watch this week

  • Featuring
  • S&P Global Commodity Insights
  • Commodity
  • Agriculture Oil
  • Topic
  • Food Security OPEC+ Oil Output Cuts War in Ukraine

Oil market participants will keep an eye on refiners' appetite for crude oil following Saudi Aramco's price increase announcement as well as OPEC+'s plan to hike production in July and August. Meanwhile, supply concerns are keeping China's copper concentrates and US corn markets on their toes.

1. Saudi Aramco promises more crude, at a price

Graph: Saudi Aramco official selling price

What's happening? Saudi Aramco recently announced its pricing for July with an increase for all crude grades into almost all markets, largely in line with expectations, on the back of a stronger crude market metrics. While OPEC+ decided to accelerate its production hikes through summer, allocating more Saudi crude to the market, it comes at a price. Volumes are not being pushed into the market and will only be lifted if refiners need barrels and this is still likely despite a ramping of strategic stock releases.

What's next? Saudi Arabia may not have as much crude available for export as its quota suggests, with the Jazan refinery ramping up runs and increased crude burn over summer. At this stage, Saudi Arabia is not being compelled to price under the market to move barrels and will only provide what refiners want, but at a market-driven price.

2. US gasoline demand by state

Graph: US gasoline demand

What's happening? US gasoline demand data for Q1 2022 ran 6% below Q1 2019 levels. Inferring state demand performance suggests most of the impairment in gasoline demand relative to Q1 2019 was in Petroleum Administration for Defense District 1 (East Coast) and PADD 5 (West Coast), at 11% and 9%, respectively. PADD 2 (Midwest and Mid-continent) was 3% below, while PADDs 3 (Gulf Coast) and 4 (Mountain and Rockies) were 3% and 2% above 2019.

What's next? The individual characteristics of states that make up the PADDs influence the speed of recovery in demand patterns for gasoline. States with high retail gasoline prices are exhibiting lagging performance. The relocation of people in response to coronavirus away from large population centers and to warmer climates, less congested areas, and faster growing economies appears to have had an impact at the margin in the pace of demand recovery of gasoline. California, the biggest state in the country is the weakest state in PADD 5 in 1Q22 at 12% below 1Q19 and did worse than 2021. Part of the weakness for California may be higher retail prices which affected California before the other states. Future state performance clearly needs to be watched for the impact from elevated gasoline prices.

3. Supply pressures hound China copper concentrate market

Graph: China copper concentrates

What's happening? China copper concentrate treatment charge has been on a downtrend since it peaked on April 18 at $84.8/mt. On the demand side, one of the largest Chinese smelters, Yanggu Xiangguang, resumed production in April and reached 90% operational rate in June, increasing spot demand significantly. Smelters are also coming back from seasonal maintenance. On the supply side, water shortages, deteriorating ore grades, and strikes are affecting production in Chile and Peru, adding more supply pressure to the market.

What's next? Markets expect the supply of standard clean copper concentrate to remain under pressure in Q3 as the development of some new mines are behind schedule. Copper production in China is expected to go up H2, but it remains to be seen whether this stabilizes supply. An ongoing strike at the Las Bambas copper mine in Peru and shipment delays from South America are also weighing on supplies into China.

4. Dry weather outlook puts US corn supply at risk

Graph: US corn acreage seen falling

What's happening? Corn planting in the US for marketing year 2022-23 (September-August) was delayed due to inclement weather conditions, which has increased chances of above-normal prevented planting acres at a time when the country's corn acreage is already at a three-year low. S&P Global Commodity Insights Analytics sees prevented planting acres in US corn to be at 3.5 million-4 million acres, compared to 2.1 million acres last year. This year US corn acreage and production numbers are very important as corn supplies are tightening globally due to various issues, including Russia-Ukraine war, which are keeping prices high.

What's next? Forecasts of drier summer is likely to add to the supply-side concerns for US corn. US weather during July to September is expected to be above normal temperatures and below normal precipitation in some parts, which according to experts could stress corn growth.

5. No sign yet of slowdown in oil, metals demand: Trafigura

Graph: Trafigura

What's happening? Trafigura reported a 27% jump in net profit for the six months to March 31 to $2.7 billion, citing sharply higher prices, market volatility and higher trading volumes. Its oil and petroleum product volumes in the period rose 14% from the H1 2021 to average 7.3 million b/d. The independent commodity trading group said it has yet to see signs of a slowdown in oil and metals demand despite high prices and soaring inflation levels. Platts, part of S&P Global Commodity Insights, assessed physical Dated Brent at $127.55/b on June 10, up from $100.48/b on Feb. 23, the day before Russia invaded Ukraine.

What's next? Trafigura sees more "heightened" prices ahead as the world's supply chains catch up with rebounding demand, and anticipates that global supply chains could remain disrupted over the coming months. It expects to continue benefiting from strong market price volatility, predicting "robust profitability and strong business performance" in the second half of its 2022 financial year.

Reporting and analysis by Dong Wang, Robert Eisen, Alan Struth, Han Lu, Shikha Singh