Drought Pain in South America Eases // OPEC+ Meets
The Commodity Report #131
Drought Pain in South America Eases
Warmer than usual temperatures and fewer than usual rains have been threatening Brazil’s major agricultural output for some time now. At this time of the year, we’re usually already in the rainy season but El Nino - the weather phenomenon which reached its peak for this cycle recently - has completely changed the weather dynamics in South America and other parts of the world.
Precipitation over Brazil and Argentina over the last 60 days (as a % of normal for this time of the year)
Precipitation over Brazil and Argentina - forecast for the next 15 days (as a % of normal for this time of the year)
But as already touched upon, El Nino has already reached its maximum strength and we see first signs of weather improvements in Brazil - perhaps an important turning point for soybean prices. More as always about how we trade these events in The Kuemmerle Report.
OPEC+ ministers face the challenge of managing a slumping oil market, as they discuss crude production quotas for 2024. The group will need next week over a virtual meeting to discuss further plans. Delegates have indicated that quotas for 2024, as well as compliance with quotas, are sticking points in the talks. With global oil demand set to moderate in the first quarter of 2024, the OPEC+ alliance appears set to extend its production cuts, though the duration is yet to be determined, analysts say.
Oil inventories in the US saw builds over the past 5 weeks - a sign that demand is slowing. We made our stance about the direction of crude oil quite clear in last week’s newsletter.
OPEC+ must manage the impact of growing non-OPEC crude production growth as well as weak economic data, particularly in key export market China. The potential market impact of geopolitical issues, including the Israel-Hamas war and Russia's ongoing invasion of Ukraine, are further complicating 2024 forecasts and OPEC+ policy plans. As well, deeper cuts could be considered, some OPEC+ officials have hinted.
This week look out for the following:
Richmond Manufacturing Index on Tuesday
Prelim GDP data for Q3 on Wednesday
OPEC meeting, Core PCE Price Index and Chinese PMI data all on Thursday
ISM Manufacturing PMI on Friday
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Till next Monday, Lukas