Data from the Vietnam Commodity Exchange (MXV) shows that on the final trading day (January 5) of the first week of the new year, selling pressure dominated the commodities market. Prices of 22 out of 31 globally traded commodities weakened, pulling the MXV-Index down by 0.42% to 2,118 points. The average trading value on the exchange reached over 4.3 trillion VND per day, a 26% decrease from the previous week, reflecting cautious investor sentiment.

Oil Prices Surge in the New Year

According to MXV, oil prices rebounded strongly in the first week of 2024 (January 2 - 7) due to supply disruptions. Additionally, escalating tensions in the Middle East and the Red Sea have increased buying pressure in the market.

Specifically, WTI oil prices rose by 3.01% to $73.81 per barrel. Brent crude closed at $78.76 per barrel, down 2.23% from the previous week.

Protests in Libya have forced operators to reduce or even halt production at the Sharara oil field, the largest in Libya with a capacity of about 300,000 barrels per day.

Previously, geopolitical instability had hindered Libya's oil industry development. According to Argus data, Libya's oil exports averaged less than 990,000 barrels per day in 2023, up 100,000 barrels per day from 2022, but still about 80,000 barrels per day below the post-war peak in 2021.

Meanwhile, tensions in the Red Sea region, which show no signs of easing, have also contributed to rising oil prices. Shipping giant Maersk announced last weekend that it would shift its routes entirely away from the Red Sea in the near future, warning customers of potential transportation disruptions.

Additionally, trade in oil between China and Iran has stalled due to Tehran's refusal to export and its demand for higher prices, tightening the supply of cheap crude for the world’s largest oil importer.

Bank of America, in a report, noted that oil prices will continue to fluctuate in 2024 due to geopolitical risks and OPEC+ policies. The bank expects Brent crude prices to trade within the range of $70 - $90 per barrel, supported by OPEC+ interventions from Q1 2024. Reuters reports that the group will meet on February 1st, which is expected to boost buying sentiment as OPEC+ could further intervene in the market through quota adjustments.

Adding to the price support, the U.S. Department of Energy (DOE) announced it would purchase up to 3 million barrels of oil to replenish the Strategic Petroleum Reserve (SPR) in April 2024. In 2023, the U.S. added approximately 11 million barrels to the SPR, with about 4 million barrels to be returned by oil companies in February 2024.

Soybean Prices Drop

Selling pressure continued to dominate the soybean market in the first trading week of 2024. After the New Year’s holiday, soybean prices maintained a downtrend from the opening of the market through subsequent sessions. Market attention has shifted to South America, where favorable weather conditions in Brazil and Argentina have led to a decline in soybean prices for the 8th out of the last 9 weeks.

The Refinitiv Commodity Research Center forecasts continued heavy rain in northern, central, and eastern Brazil this week, while the south and southeast will be dry. Temperature forecasts indicate favorable conditions in the north, while heatwaves are expected in parts of the south and east. If these forecasts hold true, the rain will significantly improve soil moisture in drought-stricken areas and recover crop yield losses.

In Argentina, the overall weather conditions are relatively positive. Recent widespread rains have improved soil moisture across the Pampas region, supporting crop development. Soil moisture is currently near or above the highest levels in six years in most major production areas, except some western provinces like La Pampa and San Luis. This has led Refinitiv to raise its forecast for Argentina's 2023/24 soybean production to 49.2 million tons, up 2% from the previous estimate.

On the demand side, the U.S. Department of Agriculture (USDA) reported that soybean sales for the 2023/24 marketing year in the week ending December 28th reached only 200,000 tons. This figure was a surprise, as analysts had expected sales to be between 500,000 tons and 1.3 million tons. Low sales during the peak period indicate that U.S. soybeans are less competitive in the market, putting pressure on prices.

Soybean meal prices weakened by over 4% last week, making it the most significant drop among agricultural commodities. With positive weather forecasts, Argentina’s soybean production is expected to recover strongly this year, allowing mills to ramp up oil extraction activities after a period of raw material shortages.

On the domestic market, as of January 5th, imported South American soybean meal prices at Vietnamese ports remained stable. At Cai Lan port, the price for South American soybean meal was 13,150 VND/kg. For the second quarter delivery, soybean meal prices ranged around 13,050 - 13,150 VND/kg. At Vung Tau port, prices were about 100 VND lower than those at Cai Lan.

Source: MXV