Commodities: Global
OPEC Again Confounded Oil Markets in early May as the cartel repeated an increase in production by another 411,000 barrels per day (bpd). This means that nearly half (44%) of the previous 2.2 mbpd in cuts will have been reversed, with another 411 mbpd in July. Additionally, Reuters reported that OPEC+ could bring back to the market the whole 2.2 mbpd by November if “Iraq, Kazakhstan and other laggards do not improve compliance and fail to deliver compensation cuts.” Originally, OPEC+ stated that it would bring back the 2.2 mbpd over an 18-month period running through to September 2026. June WTI Crude Oil closed the month at $51.21 per barrel, down -17.7% versus the end of last month and struggled in early May. The US Treasury said it imposed sanctions on a China-based independent refinery it accused of playing a role in purchasing more than $1 billion worth of Iranian crude oil. The main Chinese state-run oil firms have stopped buying Iranian crude, on concerns of running afoul of such sanctions.
The United States Produced 13.2 mbpd of oil in April, up 70,000 bpd from March. US operating oil rigs held at 484 as of May 2nd, stable with the end of March. Per AAA, the US average regular unleaded gasoline price per gallon ticked lower to $3.18 (-2¢) at the beginning of May. California was $4.78 in comparison (I filled up my car at $4.55 at Costco but regular gas stations in San Francisco are over $5). California energy prices will continue to outpace the country as the Valero refinery in Benicia (close to San Francisco) will close next April, equal to 10% of the state’s gasoline capacity gone. Phillips 76 in southern California is closing two refineries at the end of the year for another 7%. Valero has another refinery in southern California but no announcement has been made yet. US oil production will peak at 14 mbpd in 2027 and maintain that level through the end of the decade, before declining, the US Energy Information Administration said. Oil output from the world’s largest producer was projected to fall to about 11.3 mbpd in 2050. Meanwhile, data showed that US domestic natural gas production rose to 106.6 billion cubic feet per day (bcf) in April, a record high.
The Latest US Planting Figures saw 35% of the corn crop in the ground as opposed to 39% on average. Soybeans was on pace with the average at 24% with spring wheat ahead of schedule at 45% versus 34%. Argentina’s major Buenos Aires grains exchange, already forecasting a bumper wheat crop, could raise its current estimate of 20.5 million metric tons even higher if a temporary export tax cut until the end of June is extended. Showers throughout April brought relief to second corn crop farmers in Brazil. China sees its corn imports falling further to their lowest level since 2019, an official report showed, amid sluggish demand and a full-blown trade war with the US, one of its main grains suppliers. The country is forecast to bring in 7 million tons in the 2024/25 year ending in September, down from 9 million tons in the earlier forecast. However, China scooped up an unusually large amount of Brazilian soybeans, highlighting how the escalating trade war is making purchases of US crops unviable. At least 2.4 million tons of beans were booked in one week, almost one-third of the average volume China typically crushes in a month. China’s stocks of soybeans were to their lowest in nearly three years at 5.6 million tons in inventories. Ivory Coast raised its harvest forecast for 2024-2025 by as much as 10% following a fresh counting of pods last month. The world’s top producer of chocolate’s primary ingredient will harvest between 2.1 million tons and 2.2 million tons in the season that started in October, which is a rebound after bad weather and disease curbed production to 1.8 million tons in 2023-2024. Very welcome relief!
Gold Hit $3,500 Level in mid-April, before
falling off to the low $3,200s. While China’s purchases may get the headlines, it is the US that is the dominant government holder of gold per the graph right. The global silver deficit was expected to continue for a fifth consecutive year in 2025, although it will narrow by -21% to 117.6 million ounces due to a -1% fall in demand and a 2% increase in total supply, according to a report by the Silver Institute and Metals Focus. Industrial demand was expected to be flat in 2025 while jewelry and silverware demand will fall by -6% and -15% respectively in 2025. Silver coins and bar demand were projected to rise by +7% this year following a -22% decline in 2024. The fate of solar buildout will also impact 2025 demand.
In other news, An Arizona man has become the third person in the world to receive Neuralink’s brain implant – letting him ‘speak’ again. Brad Smith has ALS, a progressive disease that makes him unable to move any part of his body, except his eyes and the corners of his mouth. The disease robbed him of his ability to speak, but the implant from Elon Musk’s firm Neuralink hooked up his brain to a computer. The implant gives the patient control over a cursor on his MacBook Pro laptop to put together words. Then, Musk’s Grok AI creates an accurate vocal clone, trained on vocal recordings of Smith’s actual voice before it was lost to the condition, to read the script. Amazing.
All the best in your investing!
David Burkart, CFA
Coloma Capital Futures®, LLC
www.colomacapllc.com
Special contributor to aiSource