Financial News on October 14th This week (October 10-October 14th), most commodity futures rose, palm oil ranked first with a weekly increase of 10.18%, and low-sulfur fuel oil and crude oil ranked second and third with a gain of 9.54% and 9.18% respectively, followed by soybean oil, eggs, and pigs. In terms of decline, ethylene glycol ranked first with a weekly decline of 5.50%, followed by urea , bean 1 and pulp.
Palm oil supply in the fourth quarter showed a loose expectation of unchanged
The first day after the festival, oil and fat ushered in a significant gap and opened higher. Among them, palm oil's largest single-day increase exceeded 8.5% on Monday. The fluctuations remained relatively high in the following days. This week, palm oil futures ranked first with a weekly increase of 10.18%, and the main contract P2301 closed at 7,816 yuan/ton.
Among them, the sharp rise in international oil prices during the holiday period helped to increase the price of oil. The current annual production of biodiesel in the world is as high as more than 48 million tons, accounting for nearly 30% of the demand for vegetable oil. Against the backdrop of crude oil strengthening, biofuels have become "profitable".
According to the latest data released by the MPOB (Malaysia Palm Oil Bureau), in September, the output of Malaysia palm oil was 1.77 million tons, an increase of 2.6% month-on-month, slightly higher than the market's expectations of 1.76 million tons; the export volume was 1.42 million tons, an increase of 9.3% month-on-month, setting a new high since September 2021; at the end of September, the palm oil inventory was 2.315 million tons, an increase of 10.5% month-on-month, setting a record high since October 2019, and also higher than the market's expectations of 2.265 million tons.
Indonesian palm always accounts for more than 60% of the global production capacity. As the largest palm oil producer, its every move has touched the hearts of the market. Experts believe that India will increase palm oil imports in September to reach the annual cap of 1.2 million tons, and will purchase another 3 million tons of palm oil in the fourth quarter. The vegetable oil market is expected to grow in China's demand for vegetable oil. China's economy is recovering rapidly. China's oil reserves have declined in the past few months and palm oil imports are lower than last year, so China may increase its purchases in the near future.
Guoyuan Futures senior analyst Jiang Zhenfei said that the MPOB report is neutral and bearish, and the supply and demand data are basically in the previously expected range, with limited impact on the market. It is expected to maintain the accumulated inventory trend in October. With the end of the production increase cycle, the growth rate is expected to slow down. Indonesia's inventory fell sharply in August, but the policy of acceleration of exports has not ended. With the end of the production increase cycle, Indonesia's palm oil supply may be relatively tight. India's Diwali Festival is approaching in October, and it will accelerate the procurement of palm oil, stimulate Indonesia and Malay palm oil demand and support palm oil prices. Domestic fundamentals are relatively independent, expectations of palm oil supply in the fourth quarter have not changed, and space above the future market is limited.
fuel oil market differentiation crude oil and low-sulfur fuel oil rose by more than 9%
During the National Day holiday, due to the news of OPEC + production cuts, international oil prices soared sharply. After the opening on Monday, domestic energy and chemical varieties opened sharply higher, low-sulfur fuel soared by 11.20%, and crude oil and fuel rose by more than 10%.
This week, the main contract of SC crude oil futures rose 9.18% weekly to close at 690.1 yuan/ton. Low-sulfur fuel oil rose 9.54% weekly, while high-sulfur fuel oil rose 2.54% weekly. It is worth noting that the current fuel oil market structure maintains a differentiation pattern of "low sulfur is stronger than high sulfur". In the short term, there is no sign of reversal. During the holiday period, OPEC+ held a meeting on October 5 and decided to reduce the average daily crude oil output by 2 million barrels from November - this is the largest production cut since the agreement to significantly reduce production after the outbreak of the epidemic in 2020, and the scale of the production cut is equivalent to 2% of the total global oil exports. After the announcement of OPEC+ production cuts, Goldman Sachs raised its oil price expectations, raising its expected price of Brent crude oil in the fourth quarter of this year to $110 per barrel. Meanwhile, Morgan Stanley raised its first quarter 2023 Brent oil price estimate to $100 from $95 per barrel.
China Finance Futures analyst Wang Yangyang believes that in terms of supply, Russia's high-sulfur fuel oil exports will continue to flow into the Asia-Pacific region, and production and exports in the Middle East will also remain at a high level. The supply side of high-sulfur fuel oil remains loose.Low sulfur may still be relatively tight due to the high prices of diesel and natural gas . In the fourth quarter, the supply of high and low sulfur fuel oil continued to maintain a differentiation trend. In terms of demand, the marine oil market will continue to operate stably. In the case of cold winter expectations and high natural gas prices, the economy of low-sulfur fuel oil at the power generation end may bring a certain increase in demand for it.
The unilateral market driver of fuel oil will still mainly come from the price changes of crude oil at the cost side. In the case of OPEC+ production cuts, tight supply has supported oil prices, but weak demand will drag down oil prices. It is expected that crude oil price will continue to maintain high volatility in the fourth quarter.
Regarding the future oil price trend, Goldman Sachs believes that if this production cut continues until December 23 next year, oil prices will increase by $25 per barrel compared with its previous forecast of "2023 Brent crude oil of $107.5 per barrel". If inventory is completely exhausted, prices may soar further, eventually destroying demand. In its view, this result may be an unsustainable benefit.
So Goldman Sachs expects that cuts may only be temporary until some form of political easing allows a substantial rebound in quotas. Currently, Goldman Sachs raises oil price forecasts for the fourth quarter of this year and the first quarter of next year to $10 per barrel respectively to $110 and $115 per barrel, while acknowledging that price risks may be higher.
This article comes from the financial industry
