Demand remains a key concern for the oil market, while for grain markets, a resumption of Black Sea shipments has helped ease some supply worries.
Energy - demand worries grow
The oil market came under further pressure yesterday (April 19) with ICE Brent falling to its lowest level this month. The 100-day and 50-day moving averages should provide some immediate support to the market. However, if these support levels fail, it could trigger some further selling. A stronger dollar weighed on large parts of the commodities complex, whilst specifically for oil, demand remains a key concern. The weakness seen in refinery margins is not a great demand signal and this weakness could start to see refiners trimming run rates.
Metals – Global steel demand to recover
The World Steel Association expects global steel demand to rise by 2.3% YoY to 1,822.3mt in 2023 and then a further increase in 2024 of 1.7% YoY to 1,854mt amid recovering manufacturing activity. Looking at China, domestic steel demand declined by 3.5% YoY in 2022 and it is now expected to grow by 2% YoY in 2023 following supportive government measures, especially for the real estate sector. Meanwhile, Chinese steel demand growth is expected to remain flat in 2024. The group also expects steel demand in developed economies to recover after declining sharply last year due to monetary tightening and high energy costs. Demand from these economies is forecast to grow by 1.3% YoY in 2023 and 3.2% YoY in 2024. As for developing economies (ex-China), steel demand is expected to rise this year by 3.6% and then by a further 3.9% in 2024.
Agriculture – Black Sea grain shipments resume
Inspections of grain vessels shipped from Ukrainian ports under the Black Sea Grain Initiative resumed yesterday after being blocked for two days. This move would have helped ease some supply concerns in the global market, but there are still risks around these flows.
The Brazilian Corn Ethanol Union (UNEM) estimates that the sector will produce 6b litres of corn-based ethanol in the 2023/24 season. This would account for about 20% of total domestic ethanol production. The union further added that the future growth in Brazil’s biofuel supply will come from corn, in a country where sugarcane has dominated the market. If this is a trend that continues, it clearly would be supportive of corn prices, whilst also potentially leaving more sugarcane for sugar production.
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