Global Market Report: Demand Growth in Commodities

The oil prices experienced a boost as the United States revealed its intention to replenish its Strategic Petroleum Reserve (SPR). In other news, Chinese industrial output data fell short of expectations. However, the country’s oil refining activity and apparent demand in April are anticipated to provide support.

Oil prices saw a notable increase last week. The ICE Brent closed over 1.4% higher on the back of the US Department of Energy’s announcement. The department aims to purchase up to 3 million barrels of sour crude oil for the Strategic Petroleum Reserve. The authorities are planning to announce the results in June. In fact, the volume is relatively small in comparison to the amount from the SPR in 2022. However, this move demonstrates the US administration’s commitment to replenishing the reserve.

Chinese Refinery Activity and IEA Oil Demand Remain Strong

Recent data from China reveals that refinery activity slightly declined in April due to maintenance, but Chinese refiners still processed a significant volume of crude oil. The apparent oil demand in the country reached record levels, exceeding 15 million barrels per day (bpd). Additionally, the data suggests a decline in crude oil inventories for the month.

The International Energy Agency (IEA) is set to release its monthly oil market report. The attention will be on any revisions to its demand growth forecasts for the year. With growing concerns over the outlook, the market is eager to assess the IEA’s projections. In the previous report, the IEA forecasted a 2 million bpd growth in oil demand for 2023, with the majority expected to come from non-OECD countries.

China: Metals and Other Commodities  

Copper mine operations halted in China, affecting the Zinc market dynamic.

Zijin Mining Group Co., a leading mining company in China, reported the suspension of mining operations at one of its mines in Tibet due to an accident. The affected mine, operated by Tibet Julong Copper Co., has an annual production capacity of 160,000 metric tons.
According to the International Lead and Zinc Study Group (ILZSG), the global zinc market remained in a supply surplus of 44,000 metric tons in the first quarter of the year.

However, this surplus is significantly lower compared to the surplus of 116,000 metric tons reported a year ago. Total refined production remained stable, while consumption experienced a modest YoY increase. In the lead market, production rose by 2.7% YoY, while consumption slightly decreased. The first quarter of 2023 saw a marginal supply deficit in the lead market, contrasting with a larger deficit reported during the same period last year.

Steel Inventories And sugar Release

Recent data from the China Iron and Steel Association (CISA) indicates a decrease in steel inventories at major Chinese steel mills. Inventories dropped to 17.6 million metric tons in early May, representing a 2.8% decline compared to late April. On the flip side, there was a 2% rise in crude steel production at major mills during the same period.

Reports suggest that the Chinese government is considering releasing approximately 1 million metric tons of sugar. The act is considered the state reserve’s response to the global surge in sugar prices. If realized, this move could reduce sugar imports from China and alleviate pressure on the global sugar market.

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