Speculative rise in oil prices supports rape and soybean quotes

Soybeans and canola, which fell after the USDA report, started to recover yesterday as speculation lifted oil prices to a 2.5-month high.

September Brent oil futures on the London ICE exchange increased by 6.2% to $81.3/barrel (+9.8% for the month), and August WTI oil futures on the New York exchange rose by 6.2% for the week NYMEX rose by 6.9% to $76.8/barrel (+12%) on the background of improving macroeconomic indicators in the US, reducing the risk of recession and halting oil production at some fields in Libya.

The market supported a 4.6% increase in oil imports by China in June to a 3-year high of 12.72 million barrels per day. However, demand for oil in China is gradually declining amid a slowing economy. National Corporation CNPC (the country's largest oil and gas producer) lowered its forecast for crude oil demand in China for 2023 from 756 to 740 million tons compared to March estimates. Crude oil reserves in the country reached a 2-year high of 966 million barrels in May , which is 12.5% higher than the 5-year average of 858 million barrels.

In June, China reduced (compared to June 2022) exports of goods by 12.4% (with expectations of 10%), which was the largest drop in the last 3 years, and imports by 6.8% (with expectations of 4.1%) . This indicates a sharp slowdown of the country's economy.

According to Vortexa, crude oil stocks on tankers parked for at least a week increased by 5.5% during the week and amounted to 112.07 million barrels on July 7, although on average tankers store 85-90 million barrels of oil.

On the Chicago Stock Exchange, soybean futures fell 2-2.5% after the USDA report, but yesterday August futures rose 2.8% to $545.6/t, and November futures rose 3.1% to 503. $3/t (+2.2% for the week and 10.5% for the month). Traders make speculative purchases, understanding that the US soybean harvest will decrease and quotes for the new crop will reach the level of prices for the old crop.

On the Winnipeg exchange, November canola futures yesterday rose 2.1% to CAD 814/t or $621/t (+7% for the week, +21% for the month).

On the exchange in Paris, August rapeseed futures yesterday rose by 2.4% to €473.5/t or $532/t (+5.7% for the week, +5.8% for the month).

In the July report, USDA experts increased the forecast of global rapeseed production in 2023/24 by 0.21 to 87.42 million tons (88.34 million tons last year), in particular for Ukraine - up to 4 million tons, which compensates for the decrease in the harvest in the EU by 0.8 to 20.2 million tons due to drought in France and Germany.

On the physical market, the discount relative to November quotations on MATIF increased from -40 €/t to -60 €/t against the background of increased offers from Ukraine and Eastern Europe. EU rapeseed production forecasts are down, but soybean and sunflower crop prospects remain good.

In Ukraine, rapeseed purchase prices increased during the week from $340-350/t to $355-360/t or UAH 14,000-14,600/t with delivery to Danube ports against the backdrop of higher world prices and delays in harvesting due to rains.

Demand for rapeseed from the EU is very low. Buyers are offering €425-430/t on DAP Germany for October-November deliveries only.

An increase in canola supplies amid falling oil prices could sharply turn prices lower, especially if signs of a slowdown in China's economy intensify.