Commodity Tracker: 4 charts to watch this week

1. OPEC+ continues to produce above production targets

What's happening? OPEC+ countries with production quotas again missed their targets in August, as crude prices continue to fall, the Platts OPEC+ survey from S&P Global Commodity Insights showed. Platts assessed Dated Brent at a 17-month low of $72.125/b on Sept. 9. In response to low prices OPEC+ has already delayed by two months its plans to bring some barrels back to market in the fourth quarter of 2024. Market conditions are putting pressure on overproducers, including Iraq. The country continues to produce well above quota, despite submitting plans to compensate to OPEC. Some of this overproduction was counterbalanced by outages in Libya and maintenance in Kazakhstan in August.

What’s next? Pressure on overproducers is likely to continue in the next few months, depending on price dynamics and overall compliance. The Joint Ministerial Monitoring Committee which oversees the agreement is next due to meet Oct. 2. A full OPEC+ ministerial meeting is scheduled for Dec. 1 in Vienna. The group can call extraordinary meetings if it considers market conditions that require policy discussions or changes.

2. Crude prices halt major sell-off amid US hurricane fears

What’s happening? Crude prices halted a week-long sell-off Sept. 9 after a hurricane warning in the US Gulf Coast put a floor under concerns over a near-term supply glut and slowing global oil demand growth. Platts’ Dated Brent crude benchmark was assessed at $73.02/b on Sept. 6, the lowest since June 27, 2023, after sliding more than 11% since Aug. 29. Crude futures prices also fell sharply in the week ending Sept. 6 with markets focused on weak economic indicators in China and the US and a potential resolution to a stand-off in Libya disrupting supplies. OPEC+’s move to delay plans to start gradually rolling back 2.2 million b/d of voluntary cuts by two months to December failed to halt the sell-off on Sept. 5.

What’s next? Markets are focused on the outcomes of the UN-brokered series of meetings between two Libyan governing factions. Libyan crude exports have fallen sharply -- just 120,000 b/d in transit thus far in the week of Sept. 2, according to S&P Global Commodities at Sea data. This is well down from the more than 1 million b/d levels seen in late July and the situation remains bullish for Med sweet crude differentials. The OPEC+ alliance plans to slowly reintroduce volumes trimmed by eight members -- Saudi Arabia, Kuwait, Algeria, Oman, Kazakhstan, Iraq, Russia and the UAE -- through late 2025, depending on market conditions and starting with 190,000 b/d in October.

3. Brazilian gasoline price gap to imports widens; ethanol tumbles

What’s happening? The gap between Brazilian domestic gasoline and import prices widened, driving a stronger demand outlook for that refined product. Data from local fuel importer consortium Abicom showed on Sept. 6 that the gap reached 5%, jumping to 7% on Sept. 9. Hydrous ethanol spot prices dropped sharply, raising fears that the biofuel could lose its competitive edge at the pump. Platts assessed hydrous E100 ethanol on Sept. 6 at Real 2,980/cu m ex-mill Ribeirão Preto, the main producing region in the São Paulo state countryside, stable from Sept. 5.

What’s next? Market participants are watching closely which move state-run Petrobras will take. Recently, CEO Magda Chambriard told journalists at a government event in Brasília that the company was "comfortable" with its current refinery-gate gasoline values. Hydrous ethanol – the standalone biofuel E100 – needs to be priced at 70% or lower than gasoline to be competitive and be attractive to drivers fueling their cars.

4. High Brazilian corn prices turning China away

What’s happening? Brazil's record corn output in the marketing year (February-January) allowed the South American country to offer the most competitive prices, and emerge as China's largest trading partner for the grain. However, despite corn prices trading at some of their lowest levels in four years, Brazilian supplies are trading in the range of $6-10/mt above its main competitors the US and Argentina. Brazil's high export premiums and lower competitiveness on the global market are now pushing China towards the US. In August, a crucial month for corn exports, Brazilian outflows dropped 30% year-on-year, while supplies to China plunged 87.4%.

What’s next? Market sources and analysts anticipate that China's preference for the US over Brazilian corn will not continue as a long term trend. Brazilian producers have started sowing MY 2024-25 corn crop without delay, with no major weather disruptions looking ahead in short term forecasts. Brazilian prices can come down to more competitive levels if the country manages a big output towards the end of the 2024-25 crop cycle. Lower corn prices from Brazil will further support supplies to China in the backdrop of a comprehensive and favorable trade ecosystem already in place.

Reporting and analysis by Rosemary Griffin, Robert Perkins, Kauanna Navarro, Vinicius Damazio, Shivam Prakash