Market Gyrations

By Warren Patterson and Wenyu Yao of ING Economics

Wednesday, May 26, 2021 4:55 AM EST

Energy

Crude oil traded range-bound yesterday as the market awaits developments on the Iranian nuclear talks currently going on in Vienna. The potential for a return of Iranian oil supply into the market has been keeping oil prices from gaining further. On the positive side, physical demand has been improving in both Europe and the US as a slowdown in new Covid cases has been pushing up mobility. The start of the summer driving season in the US from next week onwards could further support crude oil demand in the country. In Asia, India has also reported a marked slowdown in new cases over the past few weeks which could help ease some of the mobility restrictions next month.

Source: Shutterstock

Meanwhile, the API reported yesterday that US crude oil inventory dropped by 439Mbbls over the last week compared to market expectations of a fall of around 900Mbbls. The institute also reported that gasoline and middle distillate stocks declined by 1.99MMbbls and 5.14MMbbls respectively, reflecting healthy demand for oil products in the domestic market. The official EIA data will be out later today.

Metals

Metals remained a mixed bag as traders reacted to Chinese rhetoric on clamping down on speculation on certain commodities trading. Gold continued to grind higher, approaching US$1,900/oz underpinned by a weaker US dollar and Treasury yields in real terms.

Meanwhile, in mine supply, BHP said it had reached a wage deal with supervisors at Cerro Colorado on Monday whilst a labour union at BHP’s Escondida and Spence mine might opt for a strike as mediation talks failed yesterday. However, the government-backed mediation talks can be extended for five more days if both parties agree. Escondida produced 1.2mt of copper whilst Spence produced 146.7kt in 2020.

In aluminum, as per the latest update, Japanese aluminum buyers were offered premiums that are as much as 35% higher for 3Q21 when compared to current levels. At least three buyers received offers of a premium of US$185/t whilst one buyer also got an offer of US$200/t for the next quarter. If agreed, then the premiums would be the highest since 2015.

Agriculture

CBOT corn prompt month contract fell 5.6% yesterday to settle at US$6.2/bu on the brisk pace of planting in the US and better than expected production outlook. CBOT soybean and wheat also traded soft yesterday, though the losses were smaller, at around 0.7% and 0.9% respectively.

The European Commission released its monthly crop monitoring report yesterday, with improved estimates of wheat production. The EC has increased wheat yield estimates to 5.7t/ha for the 2021 season compared to an estimate of 5.64t/ha made last month; the yield in 2021 is estimated to be significantly higher than the 5-yr average of 5.47t/ha and last year’s 5.5t/ha. Colder-than-usual weather in a large part of Europe over the last month countered the rain deficit as water requirement for crop development dropped. For corn, the commission left estimates unchanged at 7.81t/ha, with sowing activity nearly complete. For sugar beet, the European Commission revised down yield estimates from 75.6t/ha to 75.5t/ha; though it remains comfortably higher than the 5-yr average of 74.2t/ha.

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.

The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.

Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.

less

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.