(July 6): Commodity investors will get critical insights into energy, metals and crop markets this week against a backdrop of better-than-expected economic data and countervailing concern over the jump in coronavirus infections. Global confirmed cases are now rising by well over 1 million per week, casting a pall over expectations raw materials demand will rebound.
The International Energy Agency leads the line-up with its monthly overview of the worldwide oil market as OPEC and allies ratchet back supplies. Crop traders will dissect the latest WASDE snapshot, with corn a particular focus. And metals markets are primed for more virus-related disruptions in Chile, which may aid copper, as well as signals of booming iron ore flows, which may hurt prices.
A brace of companies report, with numbers from Suedzucker AG, Europe’s top sugar producer, and major cocoa processor Barry Callebaut AG. And last but not least, San Francisco Federal Reserve President Mary Daly and Richmond Fed President Thomas Barkin take part on Tuesday in a discussion on the U.S. economy hosted by the National Association for Business Economics.
By the Numbers
Oil-market watchers will keep a keen eye on the International Energy Agency’s monthly report on the global crude market this week for signals on how consumption is recovering from the virus-induced slump. The market will also examine key compliance data, which the IEA releases every month, indicating to what extent the Organization of Petroleum Exporting Countries and its allies are making the cutbacks they’ve pledged to clear a glut and shore up prices.
Last month, OPEC’s output fell to the lowest since 1991, while Russia reached near-total compliance with its quota. Meanwhile, tanker-tracking data compiled by Bloomberg show crude supplies from OPEC’s Middle East exporters, excluding Iran, fell for a second month in June as Saudi Arabia and key Persian Gulf allies made further voluntary production cuts on top of the unprecedented 9.7 million barrels a day agreed by the OPEC+ group of countries in April. OPEC will release its own monthly oil market report on July 14.
Red Alert
It’ll be a significant week in the copper market as investors assess fresh anti-virus curbs in Chile’s mining industry, export figures from the South American nation, and the metal’s technical backdrop. Prices may extend gains above US$6,000 ($8,363.53) after state-owned Codelco suspended construction work at its largest copper mine, adding to other curtailments and shift-pattern changes. While the country managed to maintain output at high levels in May, the first clear view into how it fared in June comes on Tuesday, with monthly export data.
There may be action on the charts, too. Driven by the powerful recovery in prices since March, copper’s 50-day moving average is now fast closing in on its 200-day counterpart and may move above it in the coming days. That pattern, a so-called golden cross, can portend further gains in an asset. Still, the last time that chart watchers saw it for copper was right at the start of 2020, just before the metal swooned as the pandemic erupted.
The Big Question
The U.S. Department of Agriculture just rocked the corn market when it said American farmers planted a lot fewer acres than analysts had expected. Traders will be anxious to see how that impacts the U.S. corn outlook in the World Agricultural Supply and Demand Estimates update on July 10. The big question: will the smaller plantings be enough to make up for declining demand in ethanol production, helping to keep inventories under control?
And in Brazil, the second-largest corn exporter after the U.S., the crop is now seen coming in below initial estimates after adverse weather affected some regions. Traders will be looking for the Conab release on Wednesday to make that adjustment in its July report.
Hungry for Information
Earnings this week from Suedzucker and Barry Callebaut should give a fresh glimpse of how the sugar and chocolate sectors are holding up, particularly as more shops and restaurants reopen in Europe. Figures from Suedzucker, Europe’s top sugar producer, are due Thursday and traders will watch for clues on whether the region’s prices will gain amid previously expected shortages, despite worries that slowing economies will curb demand.
Barry Callebaut could give the cocoa market more clarity on how chocolate demand is faring when the major processor reports results on Thursday, too. Grindings beat expectations in Europe and Asia earlier this year, but analysts said that was more to do with ramping up output ahead of potential supply-chain disruptions, rather than real consumption. The market’s been under pressure lately, with London futures near the lowest in more than a year.
Hitting Fifty
Iron ore is on the slide, dropping into the US$90s a ton on indications that surging global supplies are easing tightness in the seaborne market. With vessel-tracking data pointing to a jump in flows from Australia, this week should bring confirmation of another bumper month at Port Hedland, possibly a record. The world’s largest bulk-export terminal is used by miners including BHP Group, Fortescue Metals Group Ltd. and Roy Hill Holdings Pty.
The print for June’s performance should come in the opening half of the week -- there’s no fixed date -- and the figure may surpass the peak of 48.9 million tons set a year ago and could top 50 million tons. Last week, Brazil reported exports of 30 million tons for June, well up on the prior month and narrowly ahead of the year-ago number. Between them, the two nations account for the majority of worldwide exports, with cargoes feeding China’s steel industry.
