Summary:
- US oil inventories decreased by almost 8 million barrels last week.
- A worsening Covid-19 situation in China further weakened demand outlook for palladium.
- Wheat futures were under pressure from ongoing shipments out of Ukrainian Black Sea ports.
WTI Crude up for their 3rd consecutive session
On Wednesday, WTI crude futures increased for the third session in a row, approaching $79 a barrel as an industry report indicated a significant decline in US crude stocks and a forthcoming OPEC+ meeting stoked concerns about additional production restrictions. According to API statistics, US oil inventories decreased by almost 8 million barrels last week, far more than the predicted decline of 2.487 million barrels and following a decrease of 4.819 million barrels the week before. When OPEC+ meets on December 4 to decide on output strategy, there is speculation that the cartel will further reduce supply to counteract market weakness. On the demand side, the news that China would increase vaccination among its senior citizens helped to push up oil prices. This comes as pressure mounts on the world's top crude importer to pursue economic reopening in the wake of protracted protests.
WTI Crude Futures Price Chart
Palladium demand outlook is bleak
In line with other commodities, palladium futures dropped to below $1,900 per ounce, getting closer to a 5-month low of $1,800 set on November 3rd as a worsening Covid-19 situation in China and more lockdowns weakened an already weak demand outlook. Prices for palladium are 40% lower than they were in March due to palladium's substitution by platinum, rising interest rates, and sluggish economic development. After four straight 75 bps rises, the Federal Reserve, the most powerful central bank in the world, is anticipated to boost the fed funds rate by 50 basis points in December. Furthermore, despite the price increase and supply chain disruptions, demand for palladium, which is used in auto catalysts for gasoline-powered vehicles, has not yet returned to its pre-pandemic levels. The palladium market is projected to be balanced or in deficit this year and next year, according to analysts who predict supply-demand balances.
Palladium Mar ‘23 Futures Price Chart
Wheat futures touching 3-month lows
Chicago wheat futures were under pressure from ongoing shipments out of Ukrainian Black Sea ports, which led to a further decline to below $7.7 in late November, the lowest level in more than three months. After a time of supply uncertainty, Russia consented to a four-month extension of the UN-mediated agreement that secures a trade route for ships transporting Ukrainian grain in the Black Sea. According to Ukrainian authorities, since the agreement's inception on August 1st, the nation has been able to export more than 11 million tonnes of grain via ships, greatly allaying scarcity concerns for the following marketing year. In consequence, increased Black Sea supplies are expected to give US participants the opportunity to stockpile desperately needed goods in 2022–2033. Meanwhile, US farmers may decide to allocate farmland to wheat instead of soybeans due to lower expectations for China's soybean demand amid widespread lockdown protests, which would also increase the supply.
Wheat Futures Price Chart
Sources: tradingeconomics.com, finance.yahoo.com
