Soft commodities are mixed with cocoa continuing its month-long decline on abundant supplies in West Africa, the world’s top-producing region led by the Ivory Coast. Sugar has been benefiting from the stronger Brazilian real and the prospect of increased demand for cane towards ethanol production as crude oil recovers.
A lack of US data due to the US shutdown has left the grain sector increasingly rangebound and struggling for direction. Wheat is being held up on speculation of a slowdown in Russian exports as domestic prices rise. Soybeans traders, meanwhile, are focusing on the prospect of a trade deal while also being supported by concerns about the size of Brazil’s crop following a recent dry spell.
WTI crude oil remains stuck in a $50 to $55/barrel range with ongoing production cuts from the Opec+ group of nations being offset by global growth worries. So far, the Energy Information Administration, the International Energy Agency and Opec have all kept their 2019 outlooks for global demand growth stable.
Downward revisions, however, are now likely to surface following the aforementioned downgrade from the IMF and the OECD’s composite leading indicator, which in November dropped to 99.3 points, a six-year low and a level that has previously signalled recession
Venezuela’s deepening crisis supported prices during a week where US crude stocks rose the most since November and gasoline inventories climbed to a record. President Maduro’s dreadful regime, which has driven more than 2 million people out of the country while leaving the rest in poverty and misery, is finally seeing a strong challenge from Juan Guaido, the elected leader of the National Assembly. He has declared himself acting president under article 233 of the Constitution, which authorises him to become interim president in the event of “serious misconduct” on the part of the elected president.
The prospect of a major disruption in Venezuela combined with the risk of the US government ordering a halt to imports from Venezuela helped narrow WTI’s discount to Brent crude. The prices of Mexican and Canadian oil, two alternatives to Venezuela’s heavy crude oil, both outperformed WTI crude oil.
The outcome of this uprising could have a major short- and long-term impact on the global oil market. The deteriorating economic outlook and lack of foreign investments in Venezuela’s ageing oil industry have triggered a 50% collapse in production during the past few years. The country’s abundant heavy crude reserves are just what the world needs at a time where the US barrel is getting lighter and lighter due to rising shale production.