The Commodities Feed: US CPI is the focus

The IMF signaled that risks are skewed to the downside and marginally lowered its global growth projections for the year, yet the oil market nonetheless managed to close higher yesterday. ICE On the day, Brent ended 1.7% higher. Not only did oil benefit from a weaker USD, but also the larger commodities complex. However, today’s focus will be on US CPI, where the market anticipates a further deceleration. The CPI should increase by 5.1% annually and by 0.2% monthly. Any positive surprises would undoubtedly be bad for risk assets because they would force the market to reevaluate its estimates for how much more Federal Reserve tightening to expect.

The API made US CPI available overnight. Although the market anticipated a drop of more than 1MMbbls, the US crude oil stockpiles grew by a mere 400Mbbls. However, according to reports, Cushing’s oil stockpiles have lost 1.4MM barrels. Since Cushing’s stocks have been falling for several weeks, the prompt WTI time spread has found some support after changing from a contango to a slight backwardation.

The French energy industry has been beset by strike activity for the past month but is now slowing down. TotalEnergies has restarted its 247Mbbls/d Normandy refinery, and ExxonMobil employees have voted to end the walkout. The quick crack is trading below US$20/bbl for the first time since February last year due to the rise in French refinery runs and broader worries about global growth. ICE gasoil time spreads have also come tumbling down.

Zinc charges and agriculture production

According to the most recent sources, zinc smelters raised treatment fees for the 2023 supply by 19% YoY. The treatment charge has been agreed upon by Korea Zinc Co. and Teck Resources Ltd. at US$274/t, up from US$230/t last year and the most in the last three years. Although decreased energy prices might allow some of these smelters to resume production, European smelter closures would have been a major factor in these higher treatment fees.

In the April WASDE update, the USDA maintained its forecasts for US maize ending stocks for 2022–2023 at 1.34 billion bushels. Even so, this exceeded estimates of about 1.32 billion bushels. The reduction in 2022–23 ending stocks from 296.5 million tons to 295.4 million tons was broadly in line with market expectations. Lower in the output, there were a few quite significant modifications. Due to Argentina’s unfavorable weather, the crop dropped from 40 MT to 37 MT, and the EU’s output dropped from 54.2 MT to 52.97 MT. An increased Russian output of 1.83 mt partially offset the cutbacks. Overall, the news was somewhat negative for corn price prospects.