June 2024 Global Commodity Snapshot

Commodities: Global


OPEC Oil Output Increased 70,000 bpd to average 26.7 million barrels per day (mbpd) during June, according to a Reuter’s survey.  Nigeria and Iran reportedly increased production with Iran claiming to sell to some European countries.  Iraq and the United Arab Emirates have yet to fully implement cutbacks agreed in tandem with other leading members at the start of this year.  Iraq in particular still remains about 250,000 bpd above their quota. OPEC+ OPEC stuck to its forecast for relatively strong growth in global oil demand in 2024, despite lower-than-expected use in the first quarter, saying travel and tourism would support consumption in the second half of the year.  World oil demand was forecasted to rise by 2.25 mbpd in 2024 and by 1.85 mbpd in 2025.  Total OPEC+ spare capacity production was about 6.65 mbpd and can largely be brought online within 30 days and sustained for at least 90 days.  The graph right shows the highest spare capacity outside of COVID.  The International Energy Agency forecasted that oil-demand growth would peak around 2030 and start to contract the next year, reaching 105.4 mbpd in 2030 as the rollout of clean-energy technologies accelerates.  Meanwhile, oil-production capacity is set to increase to nearly 113.8 mbpd, driven by producers in the US and the Americas.  An examination of the above graph neatly shows that 8 mbpd gap.

US March Oil Production ticked up to 13.2 mbpd despite operating oil rigs falling from 496 as of May 31st to 479 as of June 28th.  Per AAA, US average regular unleaded gasoline prices slipped back a little to $3.49 (-5¢) as of the end of the month.  The US Department of Energy now expects US oil output to grow by around 310,000 bpd to 13.24 mbpd this year, about 40,000 bpd higher than its previous forecast in May.  Looks like we are almost there.  US West Coast refiners are replacing their heavy Iraqi oil imports with cheaper crude from Canada as the newly expanded Trans Mountain pipeline reshuffles flows.  California and Washington are set to import about 150,000 bpd of Canadian crude by tanker in June — a seven-fold increase from average volumes.

US Department of Agriculture said that farmers were basically finished with their planting schedules for both corn (94%) and soy (97%) as of June 21st.  Prices for both crops were at three-year lows as large inventories left over from 2023 and big crop expectations from 2024 weighed heavy.  Brazilian second-corn farmers were expected to reap 100.5 million metric tons of the cereal in the 2023/24 cycle, -9.9% less than the last season but more than initially projected.  Argentina began corn shipments to China (the first in fifteen years), further reducing China’s reliance on the US and leaving the prospect for even greater US grain inventories.


And in other news…

Chinese coffee consumption continued to move higher, supporting prices and backwardation (see right).Hot Chinese  Brazil’s total exports of green coffee leaped nearly +61% year-over-year in April, rising to 3.90 million 60-kg bags, industry group Cecafe said. Shipments of Arabica coffee, which account for most of the country’s exports, grew +40.1% from the year-ago month to 3.22 million bags.  Undoubtedly the two are related!

AI is not all good news and the Associated Press reported that “AI marks one of the biggest advances in military aviation since the introduction of stealth in the early 1990s, and the Air Force has aggressively leaned in… the service is planning for an AI-enabled fleet of more than 1,000 unmanned warplanes, the first of them operating by 2028… The AI-controlled F-16, called Vista… flew its first AI-controlled dogfight in September 2023, and there have only been about two dozen similar flights since. But the programs are learning so quickly from each engagement that some AI versions getting tested on Vista are already beating human pilots in air-to-air combat. The pilots at this base are aware that in some respects, they may be training their replacements…”

Finally, the latest economic indicator are the prices of men’s underwear.  Brought up by Bloomberg’s Chief Economist, he quoted Alan Greenspan as a fan of the index, from NPR’s January 1st 2008 broadcast:  “if you look at the sales of male underpants, it’s just been much a flat lie, hardly ever changes. But on those few occasions where it dips, that means that men are so pinched that they are deciding not to replace underpants.  And [Alan Greenspan] said that is almost always a prescient sort of [sign that] here comes trouble”


All the best in your investing!

David Burkart, CFA

Coloma Capital Futures®, LLC
Special contributor to aiSource