The purpose of this bi-weekly posting is to share with our readers some interesting articles regarding developments in commodities markets.

April 6, 2018

“China tariff threat deals another blow to US farmers,” The Financial Times.

 

Retaliating to recent US tariffs, China has announced a 25 percent tariff on soybeans that could be a serious blow to US farmers. Futures for May delivery dropped below $10 per bushel in response to the tariff announcement. China is the largest buyer of the oil seed, and accounts for two-thirds of the global export market. This begs the question of whether China can afford to impose duties on soybeans from the US.

“Oil edges higher as trade worries ease,” Market Watch.

 

Crude oil prices rose this week following a bullish report from the U.S. Energy Information Administration (EIA). The EIA reported crude stockpiles fell by 4.6 million barrels last week – the biggest weekly decline since January. Brent Crude was up to 68.37 a barrel yesterday and West Texas Intermediary Futures rose to 63.67 a barrel. The inventory drawdown could be a result of stronger exports and higher US and global energy demand.

“China wants to reshape the global oil market,” The Economist.

 

Beijing launched its first crude futures contract on March 26, 2018, in a bid to gain more influence in crude oil markets. China has previously attempted to introduce oil futures in the early ’90s but failed because of unstable pricing. Accordingly, China has two goals: help companies hedge against volatility, and create a standard for oil pricing that reflects its own supply and demand, rivaling Brent Crude in Europe and West Texas Intermediate in the US.

“Rise in Russian grain exports spurs trading in new wheat contract,” Financial Times.

 

The CME Group’s Black Sea wheat futures contract, launched in November 2017, has attracted wheat traders from Russia and Ukraine as well as hedge funds, bringing liquidity to the market. Russia overtook the US as the largest exporter of wheat for the 2015-16 crop year and is set to control a fifth of the global market this year.

“Saudi Aramco, Total to sign refinery expansion deal next week,” Reuters.

 

Saudi Aramco and French oil giant Total plan to sign an agreement next week to expand their joint venture refinery in Saudi Arabia. If signed, the agreement will include an extension of the petrochemical complex at Saudi Arabia Total Refining and Petrochemical (SATORP) refinery in Jubail.

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