Fed’s Interest Rate Hike Plans Impact Commodity Markets
The US Federal Reserve’s plan to raise interest rates by 25 basis points above 5% to curb inflation is causing a ripple effect in stock and commodity markets, decreasing speculative demand and prices for oil and other commodities like grains and oilseeds. The move to increase interest rates has unsettled investors and traders, leading to a reduction in demand for various commodities and an overall impact on the international trade landscape.
China’s Manufacturing Activity Index Decline and Russia’s Oil Exports
An unexpected decline in China’s manufacturing activity index in April 2023 adds to the market pressure, along with information about increased oil exports by Russia, contrary to their claims of reducing production and sales. Bloomberg reports that in recent weeks, Russia has increased its seaborne oil exports to a record 4 million barrels per day. While the Russian Federation announced a reduction in oil production at an OPEC+ meeting two months ago, this has yet to be confirmed, and the country’s authorities have since classified data on the production and export of oil and oil products.
India’s Role as a Major Buyer of Russian Oil
India remains the main buyer of Russian oil, purchasing more than the combined total of Saudi Arabia and Iraq, which were the country’s primary oil suppliers last year. Despite the increase in Russian oil supply to India, the price has dropped to a record low. Last year, India bought Russian oil at $118 per barrel, while in February, the price dropped to $72.14 per barrel, and in March, it fell further to $70.18 per barrel.
Falling Oil Prices and Their Effect on Palm and Sunflower Oil Markets
Declining oil prices are putting pressure on the palm oil market, which experienced an 11% drop in value last week on Bursa Malaysia, before recovering by 2.2% to RM3,421 per ton or $768 per ton. The palm oil market is under pressure due to a significant decrease in exports from Malaysia in April, by 18-21%, and increased exports from Indonesia, which grew after authorities reduced the limit of mandatory sales in the domestic market.
Meanwhile, sunflower oil prices remain under pressure from low demand, trading at $975 per ton with delivery to buyers. In Ukraine, sunflower oil prices have dropped to $780-820 per ton with delivery to the port, as demand from European Union countries is practically absent. This shift in the oil markets and the impact on international trade demonstrate the complex interplay between global events and commodity prices.