Commodity Market: Oil Up 7.2M Barrels, Gold to Rise 6%

Last week, the energy market witnessed notable fluctuations, with U.S. crude oil inventories rising significantly by 7.2 million barrels, surpassing the market’s expectation of a 4 million barrel per day increase. This uptick reflects a growing surplus of supply over demand. Concurrently, stocks in Cushing saw a modest rise of 0.7 million barrels. While gasoline stocks grew by 0.42 million barrels, distillate stocks took a contrasting turn, decreasing by 2.9 million barrels for the week ending February 16.

In the commodities market, Brent crude maintained its strength, trading above $83 per barrel, with the prompt spread widening to $0.95 per barrel, nearing three-month highs. Benchmark U.S. crude oil and Brent crude for April delivery experienced increases in their prices, indicating robust market dynamics. Meanwhile, wholesale gasoline, heating oil, and natural gas prices showed varied movements, highlighting the volatile nature of energy commodities.

Metals: Zinc Surplus Hits 205kt

The global metals market presented a mixed landscape. The zinc market concluded 2023 with a supply surplus of 205kt, as total refined production rose by 3.8% year over year to 13.9mt, outpacing the 1.7% increase in consumption. Similarly, the lead market reported a supply surplus, with production exceeding consumption. However, the suspension of Vale’s Sossego Mine operating license raises concerns about copper supply despite a minor price increase.

Gold and silver markets experienced slight downturns, with gold prices decreasing by $3.60 to $2,030.70 per ounce. However, the forecast for gold prices suggests a potential 6% increase over the next 12 months, driven by various economic factors and central bank activities.

Agri Challenges: Cocoa & Soybean Decline

The agriculture sector faced significant challenges, particularly in cocoa and soybean production. Ghana’s cocoa production for the 2023/24 season is estimated to fall to its lowest in 14 years, attributed to unfavourable weather conditions and smuggling issues. Similarly, due to adverse weather impacts, Argentina’s soybean and corn production forecasts have been revised downwards.

Gold Demand Rises Amid Global Uncertainty

Central bank gold purchases and investment demand dynamics offer a broader perspective on market trends. Central banks have significantly increased their gold purchases, partly due to geopolitical tensions and a shift away from U.S. dollars. While investment demand for gold remains subdued, retail demand, especially in emerging markets like China, shows signs of strengthening, influenced by rising incomes and economic uncertainties.