Oil Prices Settle Mixed On Uncertainty Over Crude Supply, Demand, And Strong Dollar

US farm markets featured some explosive prices last week even if Friday session closed mixed but mostly lower.

Corn prices completed the weekend session with 0.86% gains and 3.35% for the week. 

Soybeans eased back 0.81% on the week’s final trading day, however the March contract, has only capped its weekly gains as closed by 3.25% higher week on week. 

Soymeal futures were 2.02% in the red on Friday, and completed the week down 3.18%. 

Soybean oil futures rallied to new highs past week, despite lost 0.19% on Friday, as they gained 7.7% for the week, . 

All the wheat complex were weakest into the weekend. 

Indeed, SRW futures were 0.6% to 1.3% in the red and March was down by double digits on Friday. 

However, March SRW was still 5.2% higher from Friday to Friday. 

HRW futures closed 0.3% to 0.44% weaker on Friday.

That has meant for March contract a weekly gain of 6.5%. 

March MPLS wheat gained 6.6% from Friday to Friday, despite the front months dropping 0.93% on the week’s final trade day.

In energy market, oil prices slid for a second day in a row last Friday, pressured by an unexpected rise in U.S. crude and fuel inventories while investors took profits after the benchmarks touched seven-year highs earlier in the week.

However, both crude benchmarks rose for a fifth week in a row, gaining around 2% past week. 

Prices are already up more than 10% this year on the concerns over tightening supplies.

Particularly, Brent futures fell 49 cents, or 0.6% on Friday, to settle at $87.89 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 41 cents, or 0.5%, to settle at $85.14.

Earlier in the past week, both Brent and WTI had rose to their highest levels since October 2014.

Meantime, money managers raised their net long U.S. crude futures and options positions in the week to Jan. 18, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

To start the week, oil prices rose on this morning on worries about supply disruption amid rising tensions in Eastern Europe and the Middle East, which could make an already tight market even tighter, while OPEC and its allies continued to struggle to raise output.

Thus Brent crude futures rose 58 cents, or 0.7%, to $88.47 a barrel by 07:42 GMT.

U.S. West Texas Intermediate (WTI) crude futures gained 57 cents, or 0.7%, to $85.71 a barrel.

In the freight market, the Baltic Exchange’s dry bulk sea freight index fell for the eleventh straight session on Friday, en route to its second consecutive weekly decline, tracking weaker rates across all vessel segments.

Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, fell 59 points, or 4%, to 1,415, its lowest since mid-February 2021.

The index has lost nearly 19.8% this week.

The capesize index dropped 140 points, or 13.6%, to 891, its lowest since June 2020. The index is down 40.4% this week, its biggest drop since the week ended Dec. 17.

Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $1,157 to $7,390.

The panamax index slipped 14 points, or 0.7%, to 2,010, its lowest since mid-April 2021. 

The index was down 15.3% for the week.

Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $133 to $18,087.

The supramax index fell 24 points to its lowest level since end-February 2021 at 1,749.

In equities markets, U.S. stock indexes last Friday fell sharply, as the S&P 500 dropped to a 3-1/4 month low, the Dow Jones Industrials slid to a 1-1/2 month low, and the Nasdaq 100 slumped to a 3-1/2 month low.  

A more than -21% plunge in Netflix led technology stocks lower and weighed on the overall market after the company forecast fewer than expected streaming customers in Q1. 

Disappointing quarterly earnings results Friday from Huntington Bancshares and SVB Financial Group also weighed on market sentiment.  

In addition, long liquidation pressures weighed on stocks ahead of this week’s FOMC meeting when the Fed may announce its plans to start raising interest rates. 

Consequentially, risk aversion dominated markets and stocks slumped both on Wall Street and in Europe.

Particularly in Europe, the German, French and Italian indices fell almost 2%, with the broad Euro STOXX index of 600 leading regional companies closing down 1.84%. 

MSCI's all-country world index fell 1.74%.

On Wall Street, the Dow Jones Industrial Average fell 450.02 points, or 1.3%, to 34,265.37, the S&P 500 lost 84.79 points, or 1.89%, to 4,397.94 and the Nasdaq Composite dropped 385.10 points, or 2.72%, to 13,768.92.

For the week, the S&P 500 fell 5.7%, the Dow dropped 4.6% and the Nasdaq declined 7.6%.

The Dow fell for a sixth straight session, its longest streak of daily declines since February 2020.

The S&P 500 closed below its 200-day moving average, a key technical level, for the first time since June 2020.

Both the S&P 500 and the Nasdaq posted their biggest weekly declines since the market crashed in March 2020.

The Nasdaq has fallen 14.3% from its November peak and on Friday closed at its lowest level since June.

The benchmark S&P 500 posted its third straight week of declines, ending 8.3% down from its early January record high.

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.138% to 95.636 on friday, but increased from last week's 95.161, gaining for the week, around 0.5%.

Meantime, Asian shares were mixed on this morning.

Benchmarks declined in Hong Kong, Seoul and Sydney but rose in Tokyo. 

Shanghai was little changed. U.S. futures were higher.

Particulartly, Tokyo's Nikkei 225 index edged 0.2% higher to 27,588.37, while the Hang Seng in Hong Kong shed 1% to 24,721.49. 

In Australia, the S&P/ASX 200 lost 0.5% to 7,139.50 and India's Sensex dropped 1.7% to 58,072.62.

South Korea's Kospi dropped 1.5% to 2,794.26 on heavy selling of big technology companies like Samsung and LG Chemical. 

Thailand's SET lost 0.6%.

The Shanghai Composite index gained less than 0.1%, to 3,524.11.

On the weather side, past week a wide-ranging winter storm impacted much of the United States, bringing heavy snow to some areas. 

Much of North Dakota received snow, as well as eastern parts of South Dakota and Nebraska. 

A "snow drought" continues to impact the western Dakotas and expanded severe drought in western North Dakota. 

Improvements in drought conditions were seen in southeast and northwest Wyoming, western Nebraska, and central Colorado. 

Parts of Montana and Wyoming experienced temperatures 10 to 15 degrees higher than average past week. 

Improvements to extreme drought were made for western Montana and eastern Idaho. 

In Texas and Oklahoma, drought conditions expanded.

This week is starting with periods of light to moderate snow spreading across the northern tier states.

Low pressure system to bring showers and thunderstorms to the Gulf

Coast today into Tuesday, reaching Florida Peninsula later on Tuesday.

Moderating temperatures across much of the southern and eastern U.S. but mild afternoons over the Northern/Central Plains will be followed by arctic air intrusion Monday and Tuesday.

On the demand side, export sales data showed corn bookings bouncing from the prior week to 1.091 MMT. 

Marketing year export commitments (shipped plus outstanding sales) are 42.546 MMT, about 9% smaller than last year at this time. 

That is 69% of the full year WASDE forecast, and on average we would be only at 61% by mid-January. 

Accumulated corn exports are 28% of the USDA projection, matching the average pace. 

As for soybeans, Export Sales data indicated exporters booked a net 671,000 MT of soybeans during the week ending January 13. 

That was down from the previous week, but mostly because 984,200 MT were switched out of “unknown” to other buyers. 

Total US export commitments are now 43.108 MMT, 25% smaller than last year’s record buying pace. 

On the plus side, US Exporters have now booked 77% of the USDA full year estimate vs. the average 79% pace for this date. 

Shipments have hit 60% of the full year WASDE forecast, running a little ahead of the 57% average pace.

As for wheat, Weekly Export Sales improved to 380,600 MT for the week ending January 13. 

Export commitments are now 75% of USDA’s recently reduced full year forecast. 

They would typically be 82% by now. 

Unshipped sales on the books are 24% smaller than year ago, at 16.743 MMT. 

Meantime, USDA announced a private export sale for 247,800 MT of corn to unknown destinations last Friday under the daily system. 

Also, USDA announced on Friday a reportable private export sale as China booked 132k MT of soybeans. 

Meantime, CFTC data showed specs in corn futures and options trimming 17,856 contracts from their net long position in the week ending 1/18, taking it to net long 326,523 contracts.

Spec traders in soybean futures and options trimmed 7,240 contracts from their net long position in the week ending 1/18, taking it down to 99,639 contracts right ahead of the big rally.

Friday’s Commitment of Traders report showed managed money in CBT wheat future + options reducing their net short position last week by 2,863 contracts. 

They were still net short 24,901 contracts as of Tuesday.  

In KC wheat, they pared back their net long position by 6,555 contracts during the week, to 36,119.

Meantime, the funds were net sellers on Friday for 6,000 lots of soybeans and 5,500 lots of wheat. 

They were net buyers for 6,500 lots of corn.

From Canada, Canadian common wheat exports rose nearly 63% on the week to 304,300 mt in the week ended Jan. 16, Canadian Grain Commission data released Jan. 23 showed.

Common wheat exports for the marketing year 2021-22 (August-July) to date were sharply lower on the year. 

From Aug. 1 through Jan. 16, Canada shipped 5.5 million mt of common wheat, down nearly 41% from 9.2 million mt in the same period of MY 2020-21.

Exports of the food grain rose during the week to Jan. 16 as global wheat prices remained weak and demand for Canadian crop increased.

Meantime, exports of durum wheat rose to 11,200 mt in the week to Jan. 16 from 19,600 mt the week before, the data showed.

Durum wheat exports over Aug. 1-Jan. 16 totaled 1.2 million mt, down nearly 53% from the same period of MY 2020-21.

Canada exported a total of 26.4 million mt of wheat in MY 2020-21. 

Agriculture and Agri-Food Canada has estimated the country's wheat exports in MY 2021-22 to fall sharply to 16.1 million mt, while the US Department of Agriculture has forecast Canada's wheat exports at 15 million mt for MY 2021-22.

Canada's wheat exports are expected to be limited in the current marketing year as the exportable surplus is seen tightening, with output at the lowest in more than 14 years due to a warm and dry summer.

In MY 2021-22, Canada is likely to harvest 21.7 million mt of wheat, down sharply from 35.2 million mt the year before, the AAFC said.

The USDA, too, has pegged Canada's wheat output in MY 2021-22 at 21.7 million mt.

Meantime, export prices of Canadian wheat have seen some volatility amid choppy trade in the past two weeks, traders said. 

Despite the recent rally in exports, Canada's wheat prices have shed around 4% on month.

Indeed, the price of 13.5% CWRS wheat FOB Vancouver for 30-45 days forward was assessed at $399.41/mt Jan. 21 and the FOB Vancouver price of 13.5% CWRS wheat for 45-60 days forward at $400.51/mt, both down $3.21/mt day on day, S&P Global Platts data showed.

From South America, heat and drier weather are expected persist through next Thursday for Northern Argentina, Southern Brazil, and Paraguay as an upper-level high pressure lingers in the area. 

Central and Southern Argentina are expected to see heavy t-storms to help ease the drought in these areas through the same period. 

The 6-10 day forecast is calling for seasonably stormy weather for most of Brazil and Paraguay and drier conditions unfolding in Argentina with normal temperatures.

The summer corn harvest in Rio Grande do Sul, Brazil, reached 27% of the planted area this week, an advance of 7 percentage points over last week and 9 points compared to the previous harvest and the historical average, even in the face of droughts in the state.

Meantime, Conab is revising its production estimate for Brazil's first corn crop down to 24.8 million tonnes from 29.1 estimated last month.

Meantime, soybean harvest in Mato Grosso, reached 13.3% by Jan. 21 vs. 4.2% last week and 2.2% last year.

More fears also for Argentine production, where it is estimated that only 22% of corn in Argentina has a good to excellent crop rating of 22% and 37% which are considered poor to very poor.

In Europe, some profit-taking on Euronext last Friday in a context of strong uncertainty. 

Analysts are warning that tensions between Ukraine and Russia translate directly into higher wheat prices. 

As talks continue between the United States and Russia over the Russian military buildup on the Ukrainian border, AgriCensus reported a 3.4% rise in wheat futures. 

According to USDA data, 30% of the world's wheat exports come from the Black Sea region. 

One analyst looked at the 2014 Russian invasion of Crimea and noted that wheat prices rose 9% during that time. 

The same analyst pointed out that Russia, as a major oil exporter, can also affect fertilizer prices. 

In the event of a conflict in the Black Sea basin, gas supplies could be disrupted, with Russia alone contributing 35% of supplies to Europe.

Uncertainty is a key driver to the runup in prices, especially as Russia and Ukraine are expected to export around 20.0 MMT of wheat through the rest of their July-June export calendar.

Meantime, French soft wheat shipments outside the European Union last month were lower than in November as shipments to Algeria fell and no feed barley exports beyond the EU were recorded during the month, Refinitiv data showed.

Particularly, soft wheat exports to destinations outside the 27-country bloc totalled 808,000 tonnes in December, the sixth month of the 2021/22 season, an initial estimate based on Refinitiv loading data showed.

China was the largest non-EU destination for French soft wheat, with an initial estimate of 508,000 tonnes, followed by Morocco with 213,000 tonnes.

That is still below the 514,800 tonnes of soft wheat loaded for China in October, which was the highest monthly volume so far to the Asian country in 2021/22.

Around 33,000 tonnes of soft wheat were shipped to Algeria in December after the country led total exports in November, and no shipments are due to the country in January, Refinitiv data showed. 

In this context, farm office FranceAgriMer last week lowered its forecast of French soft wheat exports outside the EU this season, to 9.0 million tonnes from 9.2 million in December, partly because of stalled sales to Algeria, which traders attribute to a diplomatic row.

No feed barley loaded for non-EU destinations in December, reflecting the absence of loadings for China, which has dominated French exports of the grain this season.

French malting barley exports outside the EU reached 22,000 tonnes. 

Turkey was the top malting barley destination with 10,500 tonnes, with Brazil at 5,500 tonnes in second.

Grain shipments to all destinations from French ports last month - including barley, malting barley, maize, waxy maize, malt and durum wheat - totalled 1.14 million tonnes.

From North Africa, Algeria will reduce its grain imports by 25-26% in the current 2021-2022 season if, as expected, it produces 27-30 million quintals (2.7-3.0 million tonnes), the state news agency APS quoted the agriculture minister on Sunday as saying.

"The figures do not take into account quantities that farmers keep to plant their fields, those destined for charities and those that are sold directly," Mohammed Abdelhafid Henni was quoted as saying.

From the Black Sea basin, in January Ukraine maintained a sustained pace of corn exports. 

As of January 21 and since the beginning of the campaign, corn exports reached 13.7 Mt, an increase of 2.66 Mt compared to last year to date. 

According to the USDA, Ukraine could still export about 19.8 Mt of maize by the end of the campaign.

As of 21 January, Ukraine's cumulative wheat exports amounted to 16.57 Mt, against 12.85 Mt a year earlier, thanks to record production. According to the USDA, total wheat exports could reach 24.2 Mt this season.

As of 21 January, Ukraine's barley exports amounted to 5.4 million tonnes.

Ukraine's all-grain exports since the start of the 2021/22 season reached 36.08 Mt, compared to 28.26 Mt a year ago.

That was up 27.7% from the same stage a season earlier, agriculture ministry data showed on Friday.

The ministry has said the 2021/22 exports could reach 24.5 million tonnes of wheat, 30.9 million of corn and 5.2 million of barley.

Meantime, Black Sea wheat was quoted US$1/t lower last Friday.

From Australia, a deluge of rain hit South Australia’s Eyre Peninsula in recent days, with some areas recorded their biggest falls for January in history, and more than 250 millimetres recorded for the weekend. 

This caused flooding and havoc across the region. 

It has set up good subsoil moisture for the coming cropping season, although there will be some work to do in preparation with big gutters ripped through paddocks, and then getting on to them and spraying summer weeds.

Meantime, local markets were relatively unchanged as Friday came to a close. 

SA quality wheat continued to pick up a bid with H2 wheat trading at A$405/t Port Adelaide. 

Interest in for SFW1 wheat in the Port Kembla zone picked up, with ex-farm parcels and in-store parcels trading at firmer values. 

Barley remained supported over the week and continued to be bid, but liquidity remains thin.  

Canola was volatile again, and with large moves offshore, we saw local values up $5-6/t.

Author:

Sandro F. Puglisi

Source : https://www.linkedin.com/pulse/last-week-market-comment-sandro-filippo-puglisi-5f

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