US Announces SPR Purchase, Boosting Oil Prices
The move signals the US administration’s commitment to refill the SPR, dispelling doubts that had emerged in recent months. This article explores the impact of the SPR announcement, along with significant developments in the energy, metals, and agriculture sectors.
The DoE’s announced its intent to acquire up to 3MMbbls of sour crude oil for the SPR. It contributed to the upward trajectory of oil prices. Although the volume is relatively small compared to the substantial release of more than 220MMbbls from the SPR in 2022, it demonstrates the US government’s seriousness in replenishing strategic reserves. The market’s response suggests renewed confidence in the stability and resilience of oil markets.
China’s Refinery Activity and Oil Demand
China’s refinery activity saw a slight decline in April due to maintenance operations, with Chinese refiners processing 14.88MMbbls/d of crude oil compared to 14.94MMbbls/d in March. However, on a year-on-year basis, refinery activity increased by an impressive 17.6%. The data indicate that domestic oil demand reached record levels, surpassing 15MMbbls/d in April. Furthermore, the numbers suggest a reduction of approximately 300Mbbls/d in crude oil inventories for the same month.
Anticipation surrounds the release of the International Energy Agency’s (IEA) latest monthly oil market report. Meanwhile, market participants eagerly await potential revisions to the agency’s demand growth forecasts for the year.
Given prevailing concerns regarding the global economic outlook, any adjustments in the IEA’s projections will significantly influence market sentiment. In the previous report, the IEA estimated a 2MMbbls/d growth in oil demand for 2023, with a substantial portion expected to come from non-OECD countries.
Copper Mine Accident in China and Zinc/Lead Market Dynamics
Zijin Mining Group Co. reported a temporary halt in mining operations at one of its copper mines in Tibet following an accident. The mine in question, managed by Tibet Julong Copper Co., has a yearly production capacity of 160kt.
In the zinc and lead markets, the International Lead and Zinc Study Group’s data indicates that the global zinc market experienced a supply surplus of 44kt in Q1 2023, compared to a surplus of 116kt in the same period last year. While refined production remained stable, total consumption rose by 1.7% YoY. In the lead market, slight supply deficits of 19kt were recorded in Q1 2023, a notable decrease compared to the 143kt deficit reported in the previous year.
The China Iron and Steel Association (CISA) released some important information in the recent data report. Steel inventories at major Chinese steel mills declined by 2.8% in early May. This reduction coincides with a 2% increase in crude steel production at these mills.
In the agriculture sector, reports suggest that the Chinese government is considering releasing approximately 1mt of sugar. The repository comes from state reserves to alleviate the strain on global sugar prices. Such a move may lead to reduced sugar imports from China, providing some relief to the global market.
