The Commodities Feed: USD Rebound Hits The Commodities Complex

Your daily roundup of commodity news and ING views.

Energy

Having broken above US$56/bbl briefly on Friday, ICE Brent has come under some selling pressure this morning in Asia, with a stronger USD providing some resistance to the market. The market has done a lot over the last week thanks to the surprise announcement from Saudi Arabia regarding additional supply cuts. Meanwhile commodities in general have had a strong start to the year, with investors anticipating that a recovery in the global economy this year will benefit commodities. Latest COT data shows that speculators increased their net long in ICE Brent by 12,021 lots over the last reporting week, leaving them with a net long of 292,319 lots as of last Tuesday (levels last seen in February), although given the move we have seen in the market since then, the current net long is likely to be somewhat larger.

Moving on, and Iraq has increased its official selling price (OSP) for all its crude oil sales into Asia for the month of February. Basrah Light into Asia was increased by US$0.70/bbl to US$1.10/bbl over the benchmark for February. This comes after Saudi Arabia increased its OSP’s last week, following its surprise output cut announcement. Arab Light to Asia in February will be sold at US$1/bbl over the benchmark, also an US$0.70/bbl increase MoM. These increases will not be welcomed by refiners, with them having suffered from low margins for much of 2020, and rising OSP’s will do little to help.

Finally, looking ahead to data releases over the course of the week, Tuesday will see the EIA release its latest Short Term Energy Outlook. In the last release the EIA forecast that US crude oil output will average 11.1MMbbls/d in 2021, down from an estimated 11.34MMbbls/d in 2020. The EIA should also be releasing its first production forecasts for 2022. Meanwhile, on Thursday OPEC will release its latest oil market report, and as usual the market will be looking at the group’s demand assumptions, particularly with the recent surge in COVID-19 cases, and resulting lockdowns (OIL).

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