Raw material market maintains upward momentum

According to information from the Vietnam Commodity Exchange (MXV), at the end of the first trading session of the week (April 3), strong buying power in the energy market pushed the MXV-Index to continue to increase by 1.2% to 2,333 points, extending the increase to the third consecutive session. The total transaction value of the Exchange reached nearly VND 5,200 billion.

Oil prices rise more than 6% Crude oil prices jumped to their highest level in nearly a month following the production cut by the Organization of the Petroleum Exporting Countries and its allies (OPEC+). At the end of the session on April 3, WTI crude oil prices increased by 6.28% to 80.42 USD/barrel, Brent crude oil prices increased by 6.31% to 84.93 USD/barrel.

Strong demand at the start of the week saw OPEC and its allies including Russia announce plans to cut production by an additional 1.16 million barrels per day starting in May and continuing through the end of the year. Saudi Arabia and Russia are leading the cuts, each cutting about 500,000 barrels per day, along with other members such as the United Arab Emirates (UAE), Iraq, Kuwait, Algeria, Oman, Kazakhstan and Gabon. The pledges will bring OPEC+’s total cuts since November to 3.66 million barrels per day, including a 2 million barrel cut in October, or about 3.7% of global demand. The move has raised concerns about supply, and even the US is unlikely to ramp up production to fill the gap left by OPEC+. Currently, US oil production is 12.2 million barrels per day, still about 500,000 barrels per day lower than pre-pandemic levels. According to Bloomberg, this cut will wipe out the current supply surplus and push the oil market into a deeper deficit from the third quarter of this year. Bloomberg estimates also show that the deficit in the fourth quarter will increase to 1.87 million barrels per day, nearly 60% higher than the 1.17 million barrels in the scenario of no cuts by OPEC+. Many major financial institutions such as Goldman Sachs Bank forecast Brent oil prices to hit $ 95 / barrel in December, and UBS Bank raised its oil price estimate to $ 100 / barrel in June. Analysts also predict that the increase in Brent oil prices could push the price of Russian crude and other petroleum products above the limit set by the G7. US President Joe Biden has reassured the public, however, this somewhat unexpected cut by OPEC+ could cause US gasoline prices to rise back to $4/gallon (3.79 liters) from the current $3.50/gallon. US Treasury Secretary Janet Yellen also expressed that the OPEC+ cut would add to the burden of inflation and become a drag on global economic growth. The International Energy Agency (IEA) also said the cut risks exacerbating a tense market and pushing oil prices higher in the context of inflationary pressures that have not cooled down in many regions of the world, especially Europe. Rising energy prices will put pressure on central banks around the world in operating monetary policies. CME's tracking tool shows that the scenario of the US Federal Reserve (Fed) raising interest rates by another 25 basis points at its May meeting is overwhelming compared to the scenario of keeping it unchanged. The European Central Bank (ECB) may raise interest rates by another 50 basis points if inflation does not cool down. The global economy, which has been slowing down, now faces a growing risk of recession. In the US, pressure from the Fed's interest rate hikes caused manufacturing activity to fall to its lowest level in nearly three years in March due to a decline in new orders. According to data from the US Institute for Supply Management (ISM), the manufacturing PMI index fell to 46.3 points, lower than the previous month and the estimate. This is also the lowest level since June 2020. Oil prices may fall again in the medium and long term if the world economy slows down due to pressure from monetary policy causing demand to weaken more than supply. Arabica coffee rises sharply

At the end of the first trading session of the week, green dominated the price list of industrial raw materials. Arabica coffee surprised by leading the group's increase while the boom in oil prices supported raw sugar prices to set a new record high.

Despite the market's expectation that the upcoming 2023/24 coffee crop will be looser than the previous two harvests, Arabica unexpectedly jumped 3.37% after hitting a two-month low. Standard Arabica stocks on the London ICE fell to a three-and-a-half-month low of 742,609 60kg bags, which supported prices somewhat in yesterday's session. Thanks to the pull from Arabica as well as concerns about supply shortages, Robusta prices continued to improve with an increase of 1.04% in yesterday's session. Although Brazil has started harvesting, Conab forecasts a slight decline in output compared to 2022. Along with that, Reuters' warnings about supply shortages in Vietnam and Indonesia have made the market witness a general picture of a short-term supply contraction, thereby supporting the price increase. After reaching a more than 6-year high, raw sugar prices continued to rise yesterday but the increase was adjusted with a slight increase of 0.67%. The market continued to be dominated by concerns about supply shortages as major producing countries such as India, Thailand and China all forecast a decrease in output in the current crop year. In addition, crude oil prices increased sharply yesterday, also dragging down the upward trend of sugar prices. Domestic coffee prices regain momentum In the domestic market, this morning, the price of green coffee beans in the Central Highlands and the Southern provinces increased again with an increase of 400 VND/kg. Accordingly, domestic coffee was purchased at around 48,600 - 49,000 VND/kg; 1,000 VND/kg higher than the same period last month. According to estimates from the General Statistics Office, Vietnam's coffee exports in March increased by 9.24% over the same period last year, reaching 230,000 tons. Thereby, coffee exports in the first 6 months of the current crop year 2022/2023 reached approximately 977,913 tons, an increase of 2.12% over the same period last year.

Vietnam Commodity Exchange (MXV)