The Silver euphoria is over // Why crude oil continues to fall
The Silver euphoria is over
In the past two weeks, I have spoken to many people who are euphoric about silver. Many charts on Fintwit also predict that now is the time to jump back on the silver bandwagon. I believe that the next bubble could soon run out of steam, and this is not only true for gold. Subscribers to the Kuemmerle Report know which other precious metal I am talking about.
Strong downside volume on Thursday also confirmed that the metal is due for a larger correction.
Why crude oil continues to fall
The simple answer is that the China reopening effect is priced in, at a time when global economic growth continues to get revised down as the danger of a hard ending caused by a credit crunch rises.
As S&P Global reported, China's crude imports fell 16% to 10.36 million bpd in April, dropping from a 33-month high of 12.37 million bpd in March, while oil product exports hit a nine-month low. The volume was also down 1.4% from April 2022, marking the first year-on-year decrease since February.
However, analysts expect crude inflows to rebound strongly in May, which may even be higher than the level in March, due to a hefty stream from the US.
On the other hand, it seems that the popular "The Economist" cover indicator is once again going to fail. The cover of the Economist this week produced the title "Peak China? Nevertheless, I also believe that Peak China will be with us for a few more weeks, if not months, as the credit impulse from the country has not increased in speed and strength and is more than offset (in a negative sense) by the flattening growth in the western economies.
The US could soon rely on orange imports
American Farm Bureau Federation economist Daniel Munch recently detailed concerns about the U.S. citrus industry in a report titled U.S. Citrus Production – An Uphill Battle to Survive.
Since 2000, total US domestic production of oranges has dropped 80% in the, from 300 million boxes to a projected 62 million in 2023. Like oranges, grapefruit have seen a continuous drop in domestic production heavily linked to the weather and disease factors affecting Florida. Since 2000, domestic grapefruit production has dropped from 67 million boxes to 8 million boxes, an 88% decline.
Those are the leading producers of oranges 2021-22 (million metric tons)
Brazil 16.91mmt
China 7.55mmt
EU 6.3mmt
Mexico 4.28mmt
US 3.46mmt
Since the beginning of 2020, futures prices for orange juice concentrate have more than doubled by over 211% at the peak.
since the beginning of 2020, forward prices for orange juice concentrate have more than doubled by over 200% at the peak.
This week look out for the following:
Empire State Manufacturing Index on Monday
Retail Sales data and NAHB Housing Market Index on Tuesday
Philly Fed Manufacturing Index and Existing Home Sales on Thursday
Fed Chair Powell Speaks on Friday
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Till next Monday, Lukas
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