OPEC Production Unexpectedly Increased, reaching 29.0 million barrels per day (mbpd) during December (Bloomberg), still much less than the lowered quotas of 31.4 mbpd. A surprise increase from Nigeria was responsible for the improvement. OPEC+ announced no change at their December meeting but reserved the expectation to adjust production based on the impact of sanctions against Russia. The Iranian oil deal stayed dead due to their misogynistic policies and weapons support for Russia against Ukraine. Russian crude exports were indicated to fall by 100,000 bpd in December, with a possible -5-7% decline in early 2023 due to the new EU oil cap and significant shipping logistics. This implies a 0.5 to 1 mbpd decline in 2023. Russia’s flagship oil sold at less than half of international prices — and at about 65% of the European cap — following sanctions. The nation’s Urals grade, the main export grade, was $37.80 a barrel at the Baltic Sea port of Primorsk in the beginning of January. World oil demand in 2023 will rise by 2.25 mbpd, or about +2.3%, OPEC said in its December report, steady with November. The International Energy Agency (IEA) followed up with a +1.7% increase as China demand increases by 1 mbpd in 2023 on reopening gains.
US Oil Production held at 12.1 mbpd as companies decreased operating rigs from 627 as of November 25th to 621 as of December 30th. Per AAA, US average regular gasoline prices declined again, reaching $3.21 per gallon on December 31st, 26¢ lower from last month. US crude exports hit an all-time high last year as the graph to the left showed, hitting 3.4 mbpd, with exports of about 3 million bpd of refined products like gasoline and diesel fuel. The United States is also the leading liquefied natural gas (LNG) exporter, where growth is expected to soar in coming years (provided no political opposition).
China’s Daily Coal Output hit an all-time high of 13.04 million tonnes per day in November as miners increased operations to meet higher demand for heating despite the logistics problems and resulting stock builds caused by Beijing’s restrictive zero-COVID laws (now of course in the past). World coal consumption was projected to increase by +1.2% in 2022, surpassing 8 billion tons in a single year for the first time. The International Energy Agency said consumption will likely remain at that level until 2025 due to the European energy shortage and expanding coal usage in Asia. China’s grain output managed to remain above the goal of 650 million tons for the eighth consecutive year, despite a string of severe natural disasters and the impact of COVID. In particular, soybean output surged +23.7% from a year ago to 20.2 million tons and corn production gained +1.7% to 277 million tons. The soybean planting area expanded +21.7% from a year earlier to 10.2 million hectares, and yields per hectare advanced +1.6%, which is why there was such a big jump in soybean production
Ukraine’s 2023 Grain Harvest was estimated at 34m tons, down -37% versus last year and -60% below 2021, due to lower acreage and fertilizer use, likely curbing yields by 10%-30% versus the average. However, grain production in the EU and the UK is estimated at 304.4m tons in 2023, trade group Coceral said, on corn and wheat gains. That would top 285.1m tons collected in 2022. Australia wheat production is expected to rise to a record 42 million tonnes as results from the final phase of harvest show higher yields in the world’s second-largest exporter of the grain. Brazil’s bumper corn harvest couldn’t have come at a better time for global food supplies as shipments are to reach a record (graph right). Finally, fertilizers prices in North America are falling as natural gas prices and demand decline, hitting more than half the peak reached in early 2022.
Finally, in the depths of winter, I am already thinking about summer:
https://www.bbc.com/travel/article/20220816-why-theres-no-dijon-in-dijon-mustard “Since this May, France has faced a widespread dearth of Dijon mustard… After Burgundian farmers largely abandoned mustard cultivation in favor of higher-paying crops decades ago, moutardiers (mustard makers) began looking further afield… Their mustard seed needs were chiefly met by Canada, which produces about 80% of the world’s supply. But this winter, Canadian-grown mustard also dried up, when, after several years of declining production had reduced stores, dry summer weather obliterated the Canadian crop, sending mustard seed prices skyrocketing threefold.”
If your kids really love hot dogs and ever need a job… https://www.foxbusiness.com/lifestyle/hot-dog-oscar-mayer-hiring-new-class-wienermobile-drivers-travel-across-us
David Burkart, CFA
Coloma Capital Futures®, LLC
Special contributor to aiSource