Oil prices (CL1:COM) ticked lower on Monday as investors braced for a packed week for markets, starting with the U.S. Federal Reserve’s policy meeting, and OPEC+ gathering later this week, for any signals of a change in output policy following the more recent price weakness.
The OPEC+ Joint Ministerial Monitoring Committee meeting will be held on Thursday.
The meeting will be held online, and while the committee is not expected to recommend any changes to output policy, the more recent weakness would be a concern, particularly if we were to see Brent (CO1:COM) break below $80/bbl, ING analysts said in a note.
However, if there are any surprises, they would likely come in the form of delaying the start of the gradual easing in supply cuts, which is set to start in October, the brokerage noted.
On the interest rate front, investors expect the central bank to lay the groundwork for a September rate cut.
BMI (a unit of Fitch Solutions) meanwhile raised its 2024 average price forecast for ICE-listed second-month cocoa futures contracts from $6,500 per tonne to $7,000 per tonne as supply side concerns continue to exert upward pressure.
The brokerage forecast that 2023/24 will be the third consecutive season of deficit for the cocoa market, with consumption outpacing production by 0.40mn tonnes, and expects global production in 2023/24 to be 4.39mn tonnes, equivalent to a 12.1% y-o-y decrease, largely driven by unfavourable weather conditions in West Africa.
Regarding consumption, BMI expects this to decrease by 4.5% y-o-y, down to 4.8mn tonnes in 2023/24 from 5.0mn tonnes in 2022/23. “We believe that elevated prices will ultimately result in decreased demand, although we flag that this has remained relatively resilient to date,” the brokerage added.
Cocoa prices (CC1:COM) fell in July amid reports of more favourable weather conditions in Ghana and Cote d’Ivoire.
The U.S. Climate Prediction Center now forecasts that the transition to a La Niña weather pattern will occur between August and October 2024. BMI identifies this as a risk to its production forecast, as the pattern tends to bring above-average precipitation to West Africa.
“This could be beneficial for cocoa production, but if the pattern were to be particularly intense it could result in flooding and increased spread of plant disease as happened in H1 2023. We therefore flag the development and relative strength of La Niña as a leading factor to monitor with regards to the 2024/25 cocoa season,” it added.
Recent Commodity Price Movements and A look At Some ETFs
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