The new year roared in somewhat uneventful in the commodities market. The markets seemed to be finding a stride, finding their way back to fundamentals and technical data while straying from a 2-year pattern of extreme volatility. 2023 seemed like it was going to yield markets that would follow norms, the usual prior to February of 2020 when COVID-19 destroyed all the normal we all once knew. Yet 10-days into the new year we’re back to the same “old” volatile markets that have gripped the trading world for now almost 3 years.
News cycles continue to help drive the markets in 2023. From the Brazilian protests, China re-opening, and OPEC’s eerily quiet nature. The Brazilian protests boiled over to several refineries in Brazil as protestors gathered and caused concern for the refineries. Markets watched closely for signs of supply impact should disaster strike and shut down the refineries. The worries subsided as the protestors remained peaceful and violence as refineries never came to fruition.
China is set to reopen not only it’s border, but also to start easing the self-imposed Covid shut ins. This news has markets bullish on crude. Prices surged by more than a full percentage point, remaining below $80 bbl, with the news that China is reopening its borders. Additionally, crude imports to China were up 20% year over year. 131M tonnes were allocated to 44 mostly independent companies and 20 refiners. All signs point to a grand reopening of China, both from an open border travel and easing lockdowns perspective. This new rise in demand has the market rallying and supporting bullish crude futures.
Lastly, OPEC has kept a low profile in 2023. OPEC expects 2023 demand to top 2022 demand. Goldman Sachs is bullish on crude as well, estimating that crude will rebound to as high as $105/bbl. Many believe OPEC will wait until early spring to make a decision on crude output and it’s likely they will opt out of production cuts. Without a doubt, OPEC will be closely watching the price caps on Russian oil. For more on the commodities markets, contact your Guttman sales rep today!