Animal spirits were intact across global financial markets Monday as investors took the U.S. ouster and capture of Venezuelan President Nicolas Maduro over the weekend in stride, leaving grain and soy complex traders to focus on exports and South American weather after a weak finish to a holiday-shortened week.
- March corn was up 5 1/4 cents at $4.50 3/4.
- March soybeans rose 15 cents to $10.60 3.4, with March meal and March soybean oil moving higher.
- March SRW wheat was up 6 cents at $5.12 1/2, with March HRW wheat up 8 1/4 cents at $5.23 1/4.
Maduro and his wife were due to appear in federal court in New York Monday to face narco-terrorism charges. The military operation that led to his capture on Saturday led investors to eagerly await the kickoff of Asia-Pacific trade Sunday night to see if the geopolitical jitters would rattle markets.
Gold and the U.S. dollar, both traditional havens, rose in overnight trade and remained higher Monday. But Asian equities also surged overnight and U.S. stocks opened higher on Monday, with the Dow Jones Industrial Average touching a record as it pushed above the 49,000 milestone for the first time. The S&P 500 and Nasdaq were also higher. Oil company stocks were among upside leaders. The stock market gains showed that while there may have been some haven-related hedging activity boosting gold, overall risk appetite remained intact.
Crude-oil futures remain the main event, initially falling in Sunday trade after President Donald Trump on Saturday said the U.S. “run Venezuela” and work with oil companies to invest in Venezuela’s long-neglected production infrastructure. “We’re in the oil business,” said Trump, who pointed to increased sales of crude to global customers. Venezuela pumps less than 1 million barrels a day of crude but has the world’s largest proven oil reserves at 303 billion barrels. Crude futures later pushed back into positive territory, with analysts citing continued uncertainty around Venezuela.
- West Texas Intermediate crude for February delivery, the U.S. benchmark, was up 67 cents, or 1.2%, at $57.99 a barrel.
- March Brent crude, the global benchmark, was up 64 cents, or 1%, at $61.39 a barrel on ICE Futures Europe.
Secretary of State Marco Rubio on Sunday appeared to play down direct control of Venezuela, saying the administration would maintain a military “quarantine” that gives the U.S. sway over the nation’s ruling regime.
“There’s a quarantine right now in which sanctioned oil shipments – there’s a boat, and that boat is under U.S. sanctions, we go get a court order – we will seize it,” Rubio told CBS’s Face the Nation program Sunday morning.
So what matters for oil prices from here? It comes down to what kind of transition of power takes place in Venezuela, said Warren Patterson, head of commodities strategy at ING, in a note.
“Clearly, a prolonged and messy transition increases the risk for supply disruptions in the short term. However, for now, Vice President Delcy Rodríguez has taken over. While her rhetoric was initially defiant, it appears to be shifting already, with statements that Venezuela and the U.S. should work together.,” he wrote. “A smooth transition, with a government which is also more willing to cooperate with the U.S., likely leaves more downside for the market.”
In contrast, a messier transition would put around 900,000 barrels a day of supply at risk, most of which goes to China with U.S. refiners importing a little under 150,000 barrels a day, Patterson said. Losing that supply would justify some upside to current forecasts but the impact would likely be limited given a well-supplied market. Some supply losses have already been priced in since Venezuelan oil exports were pressured in December due to the U.S. blockade of sanctioned tankers moving in and out of the country, he noted.