The survey, based on data from sources at oil companies, OPEC and consultants, showed OPEC supply averaged 30.02 million barrels a day in May, up from 29.68 million barrels in April. The May increase put OPEC output above the organisation’s target of 30 million barrels a day for the first time since February. While OPEC meets on June 11 in Vienna, Austria, to consider adjusting the 30 million barrels-target, it is not expected to change the target.
July Brent crude on London’s ICE Futures Europe exchange finished at $108.40 a barrel on June 4, down $1.01 on last week’s close at $109.41.
Data at the weekend showed that China’s official manufacturing purchasing index rose to a five-month high of 50.8 in May, up from 50.4 in April. The numbers provide a bit of support for the oil market, as they are seen as mildly positive for the country’s oil demand growth. China, along with the U.S., are the biggest consumers of oil. However, the HSBC final Manufacturing PMI for China for May came in at 49.4, lower than the 49.7 ‘flash’ reading. This compares to April’s 48.1. A figure below 50 signifies contraction. In the U.S. too, the Institute of Supply Management reported its manufacturing purchasing managers’ index slipped to 53.2 in May from 54.9 in April.
Cocoa trades at 33-month high
Among the soft commodities, cocoa futures climbed higher, continuing to be supported by a tightening supply/demand outlook.
July cocoa on New York’s ICE Futures U.S. touched $3,092.5 a tonne on June 3, the highest for the front month contract since late August 2011. It settled the day at $3,066 and gained a further $17 on June 4 to close at $3,083 a tonne. Cocoa on London’s NYSE Liffe exchange was also higher, settling at £1,961 a tonne, up £11 on where it finished last week.
Cocoa prices are rising despite adequate supply availability at the present time and expectations that the global supply/demand deficit in 2013-2014 (Oct. 1-Sept. 30) now looks set to be not as big has had previously been anticipated.
This is on account mainly of higher output in West Africa, which typically produces around 70 percent of the world’s cocoa. Following plentiful rainfall across the region’s cocoa-growing areas, there are expectations of a larger-than-expected mid crop from West Africa, particularly from top grower Côte d’Ivoire. Analysts have also noted that the favourable weather conditions point to a good main crop in Côte d’Ivoire later in the year.
The London-based International Cocoa Organization (ICCO) in its latest quarterly report, released May 30, now expects the West African country to produce 1.61 million tonnes of cocoa in 2013-2014 (Oct. 1-Sept. 30), an 11 percent increase on the prior year. This compares with the organisation’s previous output estimate for Côte d’Ivoire of a 7 percent year-on-year increase.
Largely due to the improved crop from West Africa, ICCO raised its projections for global output this season, and now expects world production to increase 5.9 percent year-on-year to reach 4.162 million tonnes. Cocoa grindings, which are taken to be an indicator of demand for the main chocolate-making ingredient, have also been revised marginally upwards.
Year-on-year, grindings are expected to be up 2.7 percent at 4.195 million tonnes in 2013-2014 against 4.178 million tonnes in ICCO’s previous estimate. Mainly as a result of the higher expected output, the global market deficit in 2013-2104 now looks set to be only 75,000 tonnes against the earlier projected 115,000 tonnes.
However, worries about the risk of an El Niño weather event developing in the coming months is underpinning the market. The emergence of such an event potentially impacting 2014-2015 global output is underpinning the market.
Meanwhile, sugar futures prices came under further pressure amid lack lustre demand for the sweetener, but have yet to revisit a dip below 17 cents a pound. Raw sugar for July delivery on ICE Futures U.S. slipped to 17.03 cents a pound by close on June 4, down 34 cents on last week’s finish. On May 27, ICE July raw sugar contract touched a one-month low of 16.95 cents.
White, or refined, sugar on London’s NYSE LIffe was also lower, settling at $465.35 a tonne basis the August contract at midweek. It closed last week at $470.60.
However, Rabobank is among the analysts that expect the likely emergence of El Niño to be supportive of sugar prices in the coming months. The bank in its May Agri Commodities Monthly said the emergence of El Niño is expected to “elicit a strong speculative buying response” for raw sugar.
Arabica coffee prices continued their downtrend, pressured by ongoing talk that the drought damage to the 2014-2015 (April 1-March 31) Brazilian crop is likely to be less severe than had previously been expected. Brazil is the world’s biggest producer and exporter of arabica coffee.
The full extent of the weather-damage to the crop will become clear only near the end of the harvest. But in the early days of the harvest initial arabica yield losses are lower than expected, according to a number of analysts.
July arabica on ICE Futures U.S. slipped to a low of $1.6735 a pound on June 3, the lowest for the front month since late March, before settling at $1.7088. By close the following day, July arabica settled lower still at $1.6943.
Robusta coffee futures on NYSE Liffe were also weaker, with July finishing at $1,898 a tonne at midweek, down $39 on where it closed on May 30.
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