April 2019 Global Commodity Snapshot

OPEC Oil Production


  • fell slightly in April to 30.23 million barrels per day (mbpd), reaching cuts of 1.2 mbpd or about 300,000 bpd lower than their target of 812,000 bpd. This is the lowest level since 2015.  The next meeting is in June and with prices just above $60 in the US and similarly just above $70 in Europe, the current thinking was a continuation of these cuts for another few months.  The Saudi production in April stayed about the same at 9.9 mbpd, which is more than 700,000 bpd below the cut baseline and twice as much as their pledge of 322,000 bpd.  Comments from their oil minister at the end of April indicated little change in their production.  Russian oil output declined to about 11.2 mbpd, just higher than their target.  At the end of month, Belarus discovered that Russia sent contaminated oil through their pipes, halting oil supplies to Poland and Germany until the corrosive materials could be replaced with regular crude.  Venezuela continued to combat domestic unrest though reports indicated that April exports increased to 955,000 bpd as the country recovered from rolling blackouts.  The situation was so bad in March that the state-owned oil company had to import for the first time since 2014 – about one million barrels were shipped from Nigeria.   Iranian exports are expected to drop to 400,000-700,000 bpd in May as US sanctions limit willing purchasers – India, Iraq and China are the only onesIran's Oil Output 2011-2019 seriously negotiating with the US for waivers (and the Iraqis have had some success there).  Iran’s GDP continued to shrink, accelerating per the IMF from -4% last year to an estimated -6% this year.  Iran is also caught up in the US-China trade negotiations given China was Iran’s largest customer.  Iraq oil and gas production continued to stabilize.  Libya continued to rebuild its production to over 1.1 mbpd on the restoration of its El Sharara field, but its political situation became shakier as General Haftar who controls the eastern portion of the country ordered his troops to move on the capital Tripoli.  Fighting commenced but little further movement so far.


US Crude Oil


  • weekly numbers maintained production at 12.2 mbpd of crude oil, defying the decline of drilling rigs in operation from 816 as of March 29th to 807 as of May 3rd. Output from seven major shale formations was expected to rise by Percentage of Global Supply - Crudeabout 80,000 bpd in May to a record 8.5 mbpd, the U.S. Energy Information Administration said in its latest monthly drilling productivity report. The largest change is forecast in the Permian Basin of Texas and New Mexico, where output is expected to climb by 42,000 bpd to a fresh peak of about 4.1 mbpd.  US oil exports continued their trend higher, reaching just under 3 mbpd in February.  While Canada, South Korea, Taiwan and the UK were the primary destinations, new destinations included Indonesia and Vietnam.  Even China bought a few US cargos, arriving in April and May.  US oil inventories should remain plentiful as heavy refinery maintenance in Q2 will limit demand.  This is pretty normal though a number of upgrades are coming into place to meet tighter global sulfur standards for shipping fuel.  Finally, we should not leave out gasoline and propane exportswhich reached a record high in 2018 while diesel and marine gasoil, hit its second highest volume on record.  Natural gas also has hit record production (almost 110 billion cubic feet per day) and exports likewise climbed to records as seen to the right.


Monthly U.S. Natural Gas Exports 2006-2018


Other Commodities Headlines


  • included Chinese oil imports slacked off in March but were still higher by +1.6% year-on-year. In April, oil imports unexpectedly surged to a record, as state-run refiners built up stocks of Iranian crude oil anticipating sanctions. An interesting Chinese trend has been falling auto sales (-4% year-on-year in March) and with SUVs in particular.  Asian imports of crude oil accelerated in March to a record 26.7 mbpd as multiple countries took delivery of Iranian and Venezuelan deliveries before sanctions hit as well as more US crude was imported (a record 5.3 mbpd).


  • Chinese pork prices are set to jump 70% in the second half of the year, a senior Chinese official said, after data showed an outbreak of African Swine Fever (ASF) cut the world’s largest hog herd by 20% in the first quarter. Breeding animals have suffered a much larger decline, reportedly declining as much as -41% in the seven months to February.African Swine Fever 2012-2019  China continued to purchase more US pork despite import tariffs of 65% imposed by China, though not in large size yet.  Argentina announced at the end of April that it had struck a deal to begin exporting pork to China from 25 of the country’s meat-packing plants.  However, the sheer size of Chinese hog market means that the rest of the world cannot fill the gap without substantial price increases – which we have not seen yet in part due to the US-China trade war.


  • Note that China is also having a trade spat with Canada, as sellers of soybeans, peas and pork scrambled amid a bitter diplomatic dispute over Huawei. China already blocked Canadian canola, saying that shipments had pests with other China-bound canola cargoes cancelled.  Soybean imports by China, the world’s top buyer, slumped 13% in March from a year earlier as commercial buyers were discouraged from buying U.S. beans due to extra tariffs, while outbreaks of African swine fever hurt domestic demand for soymeal.US Soybean Exports 2014-2019  Overall, China bought 4.92 million tons of soybeans, the lowest for the month since 2015, and below the 6.0 million tons expected.  Meanwhile the world is producing a lot of crops.  In the US, winter wheat yield potential in western and central Kansas, the top state, was on track to surge from last year.  US soy exports lag due to the fall in demand from China but as the graph to the right shows, other destinations have partially stepped into the gap.  Corn planting is now 23% complete nationally (well behind the 5 year average of 46%) and soybean planting is 6% complete nationally (behind the 5 year average of 14%) as wet weather delays planting.  Ukraine’s grain exports have reached 35.6 million tonnes so far in the 2018/19 season (20% higher than last year).  Russia was on track to harvest a grain crop of 118-129 million tonnes, up from 113 million tonnes in 2018.  Argentina was forecasted to harvest 55 million tonnes of soy this season due to high yields from the mild Pampas farm belt weather.  Brazil’s 2018/19 soybean crop was poised to be the second largest on record, as good agricultural yields in late-maturing fields partially offset losses caused by a dry spell in December and January.  Farmers there should collect 115 million tonnes of oilseeds this season, 1 million tonnes above the previous poll and only less than last year’s record output of 119 million tonnes.


Finally, gold received favor from a number of central banks, with Q1 2019 purchases up 7% year-on-year – 145.5 tonnes worth about $6 billion – to make the strongest quarter since 2013.  Russia was the biggest buyer (55 tonnes), followed by Turkey (40 tonnes) and China (33 tonnes) as all these countries reduced US dollars in their reserves (note that gold is only about 3% of total Chinese reserves so this has further to go if their goal is to reach US or Russian levels).  The only large seller was Venezuela of 42 tonnes as they needed currency to cover imports and debts.  Gold prices hit a recent high of $1347 an ounce in February but fell to $1285 at the end of April.


David Burkart, CFA

Coloma Capital Futures®, LLC
Special contributor to aiSource