March 2021 Global Commodity Snapshot

  • OPEC+ Surprised Markets Again by increasing at their April 1st meeting, with increases of 350,000 barrels per day (bpd) in May, another 350,000 bpd in June and further 400,000 bpd or so in July. Adding to the upcoming supply, Saudi Arabia said it will unwind its voluntary 1 mbpd in extra cuts by 250,000 bpd inCrude Imports vs Dirty Products Imports May, 350,000 bpd in June and 400,000 bpd in July.  Saudi exports had been crawling higher, with January registering the seventh increase in a row to 6.6 mbpd.  Aramco announced that the oil output from Saudi-Kuwait neutral zone will rise to 300,000 bpd from current 120,000 bpd.  Libya’s oil production maintained 1.3 mbpd and looked to continue to 1.6 mbpd.  Iran enjoyed China’s favor with a 25-year deal to trade oil for investment.  China recently increased its imports of Iranian oil to just under 1 mbpd (right), eroding U.S. leverage as it prepares to enter stalled talks with Tehran to revive a nuclear deal.  The US warned China over undermining sanctions but that appeared to fall on deaf ears as China imported the most Iranian crude in two years in March.  Daily Iraqi oil exports rose to 3.0 million barrels in February, with monthly export revenue reaching $5.3 billion, the highest level since exactly one year ago.  In terms of improving the government’s finances, Iraq’s sovereign reserves have grown by $4 billion since the start of the year after declining continuously over the last twelve months.


  • US Production Ticked Up to 10.2 mbpd as of April 2nd while operating rigs continued higher, moving to 337 as of the same date from 309 on February 26th. The Energy Information Administration projected that US crude oil production would fall by 160,000 bpd in 2021 to 11.15 mbpd, a smaller decline than its previous monthly forecast for a 290,000-bpd drop.  The agency said it expected consumption to rise 1.41 million bpd to 19.53 mbpd in 2021, steady with its previous forecast.  We have seen the resultant prices increase at the pump which have risen to their highest level since June, 2019.  Prices have not been this high in March since 2014, AAA data showed.  March-end average pricing of $2.88 may not crimp demand too greatly, as the current price is still below a $3 per gallon threshold that is typically seen as a level that impacts consumption.  Fortunately, refineries are more-or-less back to normal production after the bitter cold of February so prices should stay in line with crude production.  The Dakota Access Pipeline that ships Bakken crude basically received more time to keep operating while its opponents attempt to shut it down.  With other transportation options (rail and truck) more expensive, more polluting and more environmentally risky from spills, this case is something to monitor.


  • China’s Crude Imports in April are expected to ease below 11 million bpd as more refineries begin turnarounds in the month, though March numbers are expected to close around 11.4 mbpd. China’s gasoline exports held at recent/all-time highs, as refineries sought to ease domestic inventories built up from Lunar New Year travel restrictions.  While electric vehicles receive a lot of government support, China announced it would cut subsidies by 20% this year.  Finally, while coal fell to 56.8% of their electricity mix at the end of 2020, China commissioned 38.4 gigawatts of new coal plants that year, offsetting closures in the US and EU.


  • Grain Production came closer into the spotlight with Argentina expected to harvest 44 million tonnes of soy and 45 million tonnes of corn this season, below the previously forecast 46 million tonnes for each crop, due to dry conditions. Historically dry conditions in Brazil last year led to a slow soybean plantingChina's Corn Imports pace and rains hampered the bean harvest, to 78% complete as of April 1st (versus 83% a year earlier).  Fortunately the sowing of their second corn crop is basically finished.  Brazilian soybean exports were up +10% in March versus a year ago, with 75% of it destined for China.  Expectations are for record shipments from now until August.  The US has begun its corn planting in the south with reportedly good conditions this early in the season.  On the demand side, China shipped in almost 5 million tons of corn in January and February, more than five times the amount unloaded a year earlier, according to their customs. That included an all-time monthly high of 3 million tons in January.  China’s sow herd grew to +34.1% in February from the same month a year earlier and 1% from the prior month, the Ministry of Agriculture and Rural Affairs said, providing a more rosy outlook than estimated by many analysts.


David Burkart, CFA

Coloma Capital Futures®, LLC
Special contributor to aiSource