Oil prices are trading stronger this morning following encouraging US inventory numbers. Concurrently, the gas market faces renewed supply concerns after operations were suspended at an LNG plant in Australia.
Energy Sector Insights
Oil prices continued their upward trend yesterday, which is expected to persist today after the American Petroleum Institute (API) reported a 2.4 million barrel drop in US crude oil inventories last week. Crude stocks in Cushing decreased by 1.9 million barrels. On the product side, gasoline inventories fell by 2.5 million barrels, while distillate stocks increased by 1 million barrels, collectively painting a positive picture.
OPEC‘s latest monthly oil market report, released yesterday, upheld its optimistic demand growth forecasts for this year and next. The organization projects global oil demand to increase by 2.25 million barrels per day (b/d) in 2024 and by another 1.85 million b/d in 2025. These figures are notably higher than forecasts from the EIA and IEA. OPEC also maintained its non-OPEC+ supply growth projections for 2024 and 2025 at 1.23 million b/d and 1.1 million b/d, respectively. The report revealed a modest increase in OPEC production by 29,000 b/d month-on-month (MoM) to 26.63 million b/d in May, while total OPEC+ output fell by 123,000 b/d MoM to 40.92 million b/d, driven by declines in Russia and Kazakhstan, with outputs falling by 119,000 b/d and 62,000 b/d, respectively. The IEA is set to release its latest monthly oil market report today.
In its latest Short-Term Energy Outlook, the EIA revised upwards its US crude oil supply growth estimates for 2024. US oil supply is now forecasted to grow by 310,000 b/d year-on-year (YoY) to 13.24 million b/d this year, up from a previous estimate of 13.2 million b/d. However, the 2025 output growth forecast was adjusted downwards from 520,000 b/d to 470,000 b/d.
Global gas markets are experiencing renewed supply concerns after Australia’s Wheatstone LNG facility suspended operations to repair its offshore platform. The Wheatstone LNG plant, with a combined capacity of 8.9 million tonnes per annum (mtpa) from its two trains, faces an uncertain timeline for resuming operations. This development caused fluctuations in gas prices throughout yesterday’s trading, though TTF settled only slightly higher. A prolonged outage could support prices, especially given the strong demand from Asia, where LNG imports grew by 10% YoY in the first five months of the year, according to LSEG data.
Metals Market Update
Russian aluminium accounted for less than half of the metal stored in London Metal Exchange (LME) warehouses in May, down from nearly 90% the previous month, per the latest LME data. However, the volume of Russian aluminium in LME warehouses rose to 246,950 tonnes from 116,325 tonnes. This increase in volume, coupled with a large inflow of Indian-origin metal, reduced the proportion of Russian metal. Indian aluminium volumes surged to 293,325 tonnes from 12,275 tonnes.
The latest LME Commitment of Traders Report (COTR) showed that investors reduced their net bullish position in aluminium by 3,670 lots to 133,439 lots as of last Friday. Similarly, money managers cut their net long positions in copper by 7,113 lots.
Agriculture Sector Anticipation
The USDA is set to release its monthly World Agricultural Supply and Demand Estimates (WASDE) report later today. Market expectations suggest an increase in US soybean ending stocks for the 2024/25 season by 12 million bushels to 457 million bushels, while corn ending stock estimates may be trimmed by 15 million bushels to 2.087 billion bushels. Globally, Brazil’s corn and soybean output estimates are expected to be adjusted to 121.1 million tonnes (-0.9 million tonnes) and 152 million tonnes (+3 million tonnes), respectively. Argentina’s corn and soybean production estimates are anticipated to be reduced to 51.2 million tonnes (-1.8 million tonnes) and 49.9 million tonnes (-0.1 million tonnes), respectively. Consequently, global ending stocks for corn are expected to decline from 312.3 million tonnes to 311.1 million tonnes, while soybean ending stocks are forecasted to decrease from 128.5 million tonnes to 127.8 million tonnes.
Related topics:
WTI Stabilizes At $78.00 After Optimistic EIA Global Demand Forecast
Sentiment Surrounding Crude Oil Demand Dims
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