Oil Prices Rise as US Fuel Inventories Decrease
Oil prices have increased for the third consecutive day as US fuel inventories decreased more than expected and tensions in the Middle East continue to rise.
At the close of business on February 7, Brent crude oil rose $0.62 or 0.79% to $79.21 per barrel. WTI crude oil rose $0.55 or 0.75% to $73.86 per barrel.
According to the US Energy Information Administration (EIA), US gasoline inventories decreased by 3.15 million barrels in the previous week, compared to analysts’ estimated increase of 140,000 barrels. Distillate fuel inventories decreased by 3.2 million barrels, compared to the estimated decrease of 1 million barrels.
However, crude oil inventories increased by 5.5 million barrels, more than expected due to production recovery, while US refineries strengthened maintenance. Analysts had estimated an increase of only 1.9 million barrels.
Refinery capacity decreased by 0.5% to 82.4%. According to EIA data, the deep freeze in the Gulf Coast region reduced capacity by 15% and put pressure on utilization to its lowest level since September 2021.
In terms of supply, EIA reduced the forecast for domestic oil production growth in 2024, which is much lower than the growth in 2023, and projected that it will not reach the record level from December 2023 to February 2025.
The oil market continues to monitor developments in the Middle East. Israeli Prime Minister said that victory in Gaza is within reach, rejecting Hamas’ latest proposal for a ceasefire to ensure the release of hostages still being held in the besieged area.
Traders are also monitoring Houthi attacks supported by Iran aimed at disrupting shipping operations in the Red Sea, which have caused disruptions to traffic through the Suez Canal, the fastest maritime route between Asia and Europe and about 12% of global trade.
In the long term, the International Energy Agency (IEA) said that India is expected to be the largest driver of global demand growth from 2023 to 2030, nearly overtaking China as the leading importer.
Gold Stabilizes as Investors Await Clarity from Fed
Gold prices remain stable as investors await clarity from the Federal Reserve on interest rate policies, while palladium drops to a 5-year low amid increasing concerns about demand.
Spot gold stabilizes at $2,034.82 per ounce. US gold for April delivery closes almost unchanged at $2,051.7 per ounce.
Investors are waiting for comments from Fed officials this week. The focus may shift to the inflation report released next week for further clues on the timing of interest rate cuts.
Palladium drops 5.5% to $899.23 per ounce, the lowest level since 2018, amid concerns about increasing demand.
Iron Ore Rebounds to 2-Week High
Most commodities and raw materials, along with Chinese stocks, are rising as Beijing signals efforts to support weakening markets.
Iron ore for May delivery on the Dalian Commodity Exchange closes up 1.1% at CNY 944 ($131.31) per metric ton, rebounding from its lowest level in over two weeks in the previous session.
Iron ore futures in Singapore stabilize at $125.05 per ton.
Other components on the Dalian Exchange show mixed performance, with coking coal down 0.3% at CNY 1,700.50 per ton, while coke edges up 0.1% to CNY 2,317.5. Rebar rises 0.6% to CNY 3,840, hot-rolled coil gains 0.4% to CNY 3,968, and stainless steel drops 0.5% to CNY 13,525, its 10th consecutive session of decline.
Rubber Prices in Japan Drop to 2-Week Low
Rubber prices in Japan drop for the second consecutive day as demand weakens ahead of the Chinese Lunar New Year holiday, domestic equities decline, and the Yen strengthens.
July rubber contracts on the Osaka Exchange close down 6.4 JPY or 2.25% at 277.6 JPY ($1.88) per kilogram, the lowest level since January 24.
Rubber in Shanghai for May delivery falls 150 CNY to 13,240 CNY ($1,841.68) per metric ton.
The Nikkei index in Japan closes down 0.11%. The Yen is mostly unchanged at 147.99 against the US dollar, after rising 0.49% overnight. The stronger Yen makes assets priced in this currency more expensive for foreign buyers.
Cocoa Prices Reach Record High
Cocoa prices on the ICE exchange in New York reach an all-time high, surpassing the previous record set in 1977, amid global shortages of the commodity.
This all-time high for cocoa in the US comes just days ahead of Valentine’s Day, one of the biggest periods of chocolate consumption in the country.
New York cocoa prices rise 3.6% to $5,410 per ton. London cocoa also reaches a record high, increasing 2.4% in the day to 4,344 pounds per ton.
New York cocoa has risen 61% in 2023 and increased 29% since the beginning of this year due to reduced production in Africa caused by adverse weather conditions.
Other commodities show mixed performance, with raw sugar up 1.4% to 23.88 US cents per pound, while white sugar rises 0.7% to $656.5 per metric ton.
Arabica coffee closes up 1.5% at $1.8785 per pound, while robusta coffee gains 0.6% to $3,115 per metric ton.
Corn and Soybean Prices Hit Multi-Year Lows
Corn prices in Chicago reach multi-year lows amid dry and hot weather conditions in Argentina, which are expected to be replaced by widespread rainfall in the coming days.
Soybean prices also decline, with the most heavily traded contract hitting a 14-month low due to expectations of rain in key Brazilian growing regions.
Corn futures on the Chicago Board of Trade close down 4.5 cents to $4.34-1/4 per bushel. Soybean futures at the CBOT decrease 10.5 cents to $11.89 per bushel. Wheat futures rise 7 cents to $6.02 per bushel.
