Commodities: Global
OPEC Oil Production Averaged 26.1 million barrels per day (mbpd) during September as Russian production declined to its monthly target, reaching just under 9.0 mbpd. However, its exports increased to 3.3 mbpd as Pacific flows rebounded. Libyan oil exports were set to resume as the standoff between rival political factions over control of the central bank and oil revenue reached resolution. All these events were overshadowed in late September / early October as Israel successfully decapitated (literally and figuratively) Hezbollah’s leadership, neutering Iran’s most powerful proxy. Iran retaliated with ballistic missiles which
were generally intercepted. As of the time of writing, the world awaits Israel’s response, knowing that a crippling strike on Iran’s oil infrastructure would send oil prices soaring, at least temporarily. China in particular would be directly affected as the largest consumer of Iranian oil, as it ignores sanctions. Saudi Arabia indicated that it would likely abandon its $100 crude oil target and seek to increase production given its low cost. As the graph left shows, they have the capacity to return to the 10.5 – 11.0 mbpd from the current 9.3 mbpd. This may be an OPEC negotiating ploy to keep others in line as the UAE was supposed to be producing 2.9 mbpd, but most analysts speculate they are exceeding that limit by as much as 0.6 mbpd.
US Oil production Held at 13.3 mbpd as operating oil rigs ticked higher from 483 as of August 30th to 484 as of September 27th. Per AAA, US average regular unleaded gasoline prices per gallon fell to $3.20 (-14¢) by the end of the month. As you can see in the graphic left, production was at record levels, leaving little room for additional drilling (but plenty for imports from a Key[stone] pipeline.
China’s Daily Crude Oil Imports Rose last month to their highest in a year, customs data and Reuters records showed, as shipments staged a tentative recovery on lower crude oil prices and improving refining margins. Daily crude oil imports stood at 11.6 million barrels per day (bpd) last month, the highest since August a year earlier. Reuters also cited research that indicated that Chinese oil demand peaked in 2023 and was forecast to decrease by 1.1% annually between 2023 and 2025, with the drop accelerating in subsequent years. Chinese demand began declining due to the growing adoption of LNG trucks and electric vehicles, as well as China’s slowing economic growth following the COVID-19 pandemic. Gasoline demand in China was forecasted to peak in 2025. If so, then Russia and Iran will be fighting over a shrinking market. Too bad.
China, the world’s largest Gold consumer, refrained from gold imports from Switzerland in August for the first time since January 2021, customs data showed. The supplies from Switzerland to China dried up in August, after a steady decline in June-July, as rising spot gold prices kept retail buyers at bay. However, India’s gold imports hit their highest level on record by dollar value in August at $10.06 billion, according to government data. That implies roughly 131 tonnes of bullion imports, the sixth-highest total on record by volume. While the price has increased, the Indian government cut import duties on gold by 9%, partially offsetting the rise. In addition, Costco’s US stores have seen strong gold demand. Per Bloomberg, 77% of surveyed Costco outlets that stock bullion bars were sold out in the first week of October, based on calls to 101 stores in 46 states. Costco executives noted the popularity of its gold offerings during a September 2023 earnings call. In its fiscal first quarter, the company said it sold more than $100 million in gold bars — equal to about 51,740 ounces, based on calculations using average gold prices during that period. Costco just launched platinum bar sales on its website, expanding its offerings per CNBC.
China brought in a record 12.14 million metric tons of soybeans in August, as traders took advantage of lower prices to stock up. Last month’s imports were a jump of 29% from 9.43 million tons a year ago, according to Reuters’. Meanwhile, Brazil’s soybean crop is expected to reach 166 million metric tons in 2024/25, up 12.8% from the previous season, per the national crop agency Conab. Argentina too is pushing up all grain and soybean production, which could reach up to 143 million metric tons in the 2024/25 season under normal weather conditions, which could boost exports to their highest volume in four years, to 101.5 million tons, the Rosario grains exchange said. The US crop is moving strongly with 30% of corn harvested versus 21% last week and soybeans at 47% versus 26% – a very quick pace for the time of year.
And in other news:
You know the US is in a recession when Burning Man tickets have not sold out yet… in recent years the psychedelic art event had over 80,000 attendees and current ticket prices are almost $600… plus renting an RV, bringing own food, glow-sticks, etc. The same economic pressures can be said affecting Lollapalooza and Coachella, two other festival events. Lollapalooza tickets typically sold out in a few hours; this year it took weeks. Could the top 10% be feeling the pinch?
All the best in your investing!
David Burkart, CFA
Coloma Capital Futures®, LLC
www.colomacapllc.com
Special contributor to aiSource