Commodities: Global
OPEC Oil Production Fell to its lowest level since January to average 26.4 million barrels per day (mbpd) during August, per Reuters. Iraq, however, continued overproducing, pumping 220,000 barrels per day extra (which were supposed to be reversed and more in the near future). Oil exports at major Libyan ports were halted amid a standoff between rival political factions over control of the central bank and oil revenue. However, in early September, negotiations were moving forward, easing tensions. Russia’s seaborne oil flows rebounded to the highest in almost two months, boosted by a recovery in shipments from its Sakhalin Island projects in Asia. India was often cited as a key buyer. Russia still has dozens of empty and idle tankers after being hit with US, UK and European sanctions that began ramping up in Oct. 2023. Some were targeted for breaching a price cap on Russian oil exports, others for belonging to the state tanker firm Sovcomflot PJSC. Finally, another batch were designated for the environmental risk they pose due to their age and/or construction. OPEC+ was supposed to start unwinding one layer of output cuts from October, but they chose to delay the process two months given the weakness in prices. A Panama-flagged crude oil tanker was hit and severely damaged by the Houthis, leaking oil and damaging the environment. Houthis also attacked a Saudi-flagged tanker. With the continuing proxy war between Iran and Israel, there is no sign of these disruptions easing.
US Oil production held at 13.3 mbpd as operating oil rigs rose from 482 as of August 2nd to 483 as of August 30th. Per AAA, US average regular unleaded gasoline prices slipped back to $3.34 (-14¢) by the end of the month despite low inventories in oil and gasoline. This favorable trend may soon reverse as both Ford and GM announced plans to cut billions in electric vehicle investment due to a lack of demand. On a more personal observation, our building’s garage was wired for electric vehicles about six months ago. Nowadays, out of the 32 parking places, I have seen only two [hybrid] cars use the outlets for charging. Perhaps not enough time has passed for people to buy new cars, but the demand does look lacking. However, more threatening to lower gasoline prices is that US regulators are supposed to revise guidelines on how to protect endangered species in the Gulf of Mexico. Under a court ruling, the US government has until December 20th to revise that analysis, when the current one will be tossed out. If regulators do not finish by the deadline — and courts or Congress don’t intervene to provide more time — existing oil and gas operations that depend on the evaluation could halt output, eliminating over 10% of US production, which would probably send prices up 10-20%, depending on location. Southern US employment would also take a hit. What will Biden / Harris do, given it is an election year? Keep quiet until after the election and then appease their conservationist base regardless of the vote outcome? Or kick the can down the road by delaying the deadline? Something to watch.
Meanwhile, China Imported -2.4% Less Oil during the first seven months of 2024 than a year earlier. Putting aside the period when Covid-19 savaged demand, that’s the first time that’s happened in data going back
almost two decades (see right). Besides the stumbling economy, electric vehicles and trucks powered by natural gas are set to displace 10% to 12% of gasoline and diesel demand this year, according to China National Petroleum Corp. The years-long property crisis also crimped purchases of plastics-heavy products as fewer people from a declining population moved into new homes. Finally, Chinese coal stockpiles have risen to records – no cause for climate
advocates to celebrate as coal that’s oxidized in a stockpile will produce carbon dioxide just as surely as the stuff that’s incinerated in a power plant — it just will not produce any useful energy, a worst-of-both-worlds situation.
US Department of Agriculture said US farms have held steady at high levels for corn and soy crop conditions. Prices for both crops remained at three-year lows as large inventories left over from 2023 and big crop expectations from 2024 weighed heavily. Estimated US soy output of about 4.6 billion bushels (124.9 million metric tons) was bigger than analysts’ expectations for 4.5 billion, according to the USDA’s monthly report, while a record yield of 53.2 bushels per acre also surpassed analyst estimates. Brazil’s 2024-2025 soybean harvest is projected to reach a record 170 million tonnes, a +11.8% increase from the previous season. The USDA also raised its forecast for Ukrainian wheat production by +10.8% to 21.6 million tons for 2024-2025. In short, plenty of grain available for food, ethanol and feed.
And in other news:
A massive 2,492-carat diamond—the second-largest stone ever unearthed—has been recovered from a mine in Botswana. The stone, found at the Karowe mine that’s run by Canada’s Lucara Diamond, isn’t that much smaller than the 3,106-carat Cullinan Diamond, the world’s largest, which was discovered in South Africa almost 120 years ago.
And no, that is not my hand holding it…
All the best in your investing!
David Burkart, CFA
Coloma Capital Futures®, LLC
www.colomacapllc.com
Special contributor to aiSource