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DJ Global Commodities Roundup: Market Talk

· 02/04/2021 14:41

The latest Market Talks covering Commodities. Published exclusively on Dow Jones Newswires throughout the day.

1440 ET - US benchmark oil prices end a choppy session 1% higher at a fresh, 1-year-high of $56.23 a barrel amid tightening global supplies and expectations for a strong recovery in demand by the spring. WTI crude's increase marks four straight sessions of gains and sets it on course for one of its biggest weekly gains in months. Bob Yawger at Mizuho says declining US oil inventories, including a big drop in stockpiles at the US storage hub in Cushing, Okla., are providing fundamental support for price. He says further lift is coming from hopes for an economy-boosting US stimulus package, and rising overall risk appetite as US stock markets rise. (dan.molinski@wsj.com)

1311 ET - US grains stockpiles are expected to continue their slide in next week's WASDE report, according to analysts surveyed by The Wall Street Journal this week. Corn is projected to fall 189M bushels to 1.36B bushels, while soybeans are expected to slide 21M bushels to 119M bushels. Additionally, world stockpiles of those grains are expected to dip--particularly corn, which is expected to contract by 3.8M metric tons. Trading on the CBOT is mixed Thursday, with corn down 0.6% and soybeans up 0.2%. (kirk.maltais@wsj.com; @kirkmaltais)

1251 ET - Unilever will have to navigate commodity inflation and greater foreign-exchange effects this year, says the company's chief financial officer, Graeme Pitkethly, during an earnings call. "We are seeing quite a bit of commodity inflation and a larger foreign-exchange impact as we go into 2021, particularly in Latin America, in Turkey, in India, and in South Africa," he says. Specifically, Pitkethly says the inflation will be felt in tea, palm oil, liquid oils and in food ingredients, adding that the company expects mid-to-high single-digit commodity inflation in the first half, putting pressure on frugal consumers. (adriano.marchese@wsj.com)

1207 ET - Any upside seen in US grains futures Thursday is limited due to a strengthening of the US dollar, says Terry Reilly of Futures International. "Higher USD is limiting upside potential in all major CBOT commodities this morning," Reilly says. The USD index trading on the Intercontinental Exchange is up 0.4% today, and has risen 1.9% since the start of the year. Meanwhile, CBOT grains are higher overall year-to-date, but soybeans and wheat in particular have given back much of their gains from highs reached in the first-half of January. (kirk.maltais@wsj.com; @kirkmaltais)

1206 ET - Copper prices edge lower as the metal enters a seasonally weak period ahead of the Chinese New Year holiday. Three-month copper falls 0.4% to $7,817 a metric ton and has fallen 1.1% this week. The declines have prompted some broader concerns about slowing Chinese demand for the metal. But falls shouldn't be lasting as there has been little change to the bullish backdrop of low inventories and high demand for the metal, says Marex Spectron. Government stimulus measures should also likely stay in place throughout the year, giving added support to metals, Marex says. "Whilst there were short term demand concerns as China saw a rise in [a second wave] of Covid and resultant curbs, the overall theme remains positive," the brokerage says. (william.horner@wsj.com)

1148 ET - One factor fueling the demand for US soybeans is efforts in China to rebuild its hog herd following the devastation of African swine fever -- which requires increased level of soymeal. However, China is running into issues scaling up its hog production based to pre-disease levels, causing import buyers there to purchase more US pork, says Dan Hueber of the Hueber Report. Any issues expanding China's hog herd may cut into the country's demand for US soybeans. In the USDA's export sales report this morning, 17,900 metric tons of US pork were sold to China for the week ending January 28. Meanwhile, 1.13 million tons of soybeans were sold to China for both the 2020/21 and 2021/22 marketing years. (kirk.maltais@wsj.com; @kirkmaltais)

1051 ET - NetJets, the private-jet company owned by billionaire Warren Buffett's Berkshire Hathaway, says it's made a significant investment in WasteFuel, which is developing a biorefinery in the Philippines with plans to convert 1M tons of municipal waste into 30M gallons of sustainable aviation fuel. NetJets says it's the first private aviation company to buy a stake in the production of sustainable aviation fuel, adding that it will buy at least 100M gallons of the Manila refinery's product over the next 10 years. Another billionaire, Enrique Razon of the Philippines, is backing the WasteFuel project through his Prime Infra infrastructure arm. (colin.kellaher@wsj.com)

1042 ET - US benchmark oil prices erase overnight gains to fall 0.5% to $55.40 a barrel as investors worry a 17% rally in prices over the past 30 days amid tightening supplies will lead major producers to start raising production. Prices closed Wednesday at their highest in more than a year after the EIA reported US crude-oil inventories fell to an 11-month-low 476M barrels. But those declines could reverse if US crude production, which has stayed relatively low near 11M barrels a day for 12 straight weeks, begins to climb. And a 10-week streak of increases in the Baker Hughes US oil rig-count might suggest production increases are coming. (dan.molinski@wsj.com)

1041 ET - Natural gas prices rise 1% to $2.813/mmBtu after the EIA reports a larger-than-normal weekly decline in gas inventories amid cold weather in the Northeast that boosted heating demand. The government agency says stockpiles fell by 192B cubic feet last week, which is near to forecasts in a WSJ survey for a 194-bcf decline, and much larger than the five-year-average withdrawal of 146 bcf. The decline leaves total inventories at 2.689T cubic feet, which is still a bearish 8% above the average for this time of year, although analysts say continued cold weather in February likely will narrow that surplus by a couple percentage points over the coming weeks. (dan.molinski@wsj.com)

1030 ET - Continental will likely post positively surprising preliminary results ahead of its scheduled earnings release in March, say analysts in a BofA Global Research report. The German car-parts supplier should have benefited from strong auto production at the end of 2020 in Germany and in Europe overall, while the winter weather in the continent likely brought on a particularly strong sell-out in tires, the analysts say. In particular, BofA analysts forecast 4Q adjusted EBIT of EUR889 million, which is around 35% ahead of consensus, they say. For 2021, they expect Continental to provide a cautious outlook but also assume the company will "under-promise and over-deliver." Shares in Continental trade 2.1% higher at EUR124.50. (kim.richters@wsj.com)

1013 ET - Livestock futures trading on the CME are a mixed bag--with live cattle futures down 0.1% and lean hog futures up 0.6%. For hog futures, today's export sales data was promising. A total of 46,300 metric tons of US pork exports were sold, with 17,900 tons sold to China. This is an uptick in the amount of pork China purchased, having bought only 13,900 tons last week. Demand for US agricultural goods in China has been a key driver for US agricultural futures, including livestock. Meanwhile, beef exports totaled 29,800 tons, with South Korea, Japan, and China being the primary buyers. (kirk.maltais@wsj.com; @kirkmaltais)

1007 ET - Iron-ore mining giant Vale SA's $7B settlement agreement with prosecutors in the Brazilian state of Minas Gerais is good for victims of the 2019 Brumadinho dam disaster and for the company, according to Marcelo Gandelman, a Rio de Janeiro-based lawyer who specializes in corporate conflict resolution. Vale and prosecutors announced the agreement Thursday, though prosecutors said criminal cases against former Vale employees will continue. By settling, instead of fighting it out in court, victims of the deadly disaster and the region will get financial help more quickly, and the company avoided the possibility of a bigger penalty imposed by a court ruling, Gandelman said. (jeffrey.lewis@wsj.com)

(END) Dow Jones Newswires

February 04, 2021 14:41 ET (19:41 GMT)

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