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The Group of Seven nations announced Friday they would coordinate a release of 100 million barrels of oil and fuel products over the next four months, kicking off with “substantial” amounts of diesel within the next 20 days in a bid to knock down soaring prices that have sparked fears of a global inflation wave. The G7 includes the U.S., Germany, Japan, U.K., France, Italy and Canada.
The move also takes the prospect of a U.S. export ban on diesel off the table. The statement said members reaffirmed a commitment to “refrain from export restrictions on energy and energy products between G7 countries…” The Trump administration had weighed a potential export ban, though economists warned it would create a further spike in prices outside the U.S. that posed a threat to global economic growth and would likely deliver only short-term relief on the domestic front. News reports said the administration had pressured European officials this week to release emergency diesel stockpiles or face the prospect of an export ban.
Diesel prices have soared to records in the U.S. with harvest season under way. November diesel futures on Nymex dropped 1.8% on Friday as reports indicated a coordinated release of diesel stockpiles was likely on the way. Prices still remain highly elevated.
Weekly market recap: Soybean futures stumbled out of the gate to begin the week after details of an agreement between the U.S. and China to cut tariffs on a range of goods left the legume off the list. Concerns about the pace of China purchases following the Trump-Xi summit also remain a concern. Corn suffered a midweek rout after quarterly USDA Grain Stocks data delivered a bearish surprise. Wheat futures saw pressure as planting weather improved in the Plains, though Black Sea bottlenecks continue to stoke supply concerns. A firmer U.S. dollar also served as a headwind for commodity prices. Cattle futures were firmer as slaughter rebounded after last week’s ICE raids curtailed activity in the southern Plains, but fell prey to profit taking on Friday as boxed beef prices slumped. Hog futures fell to contract lows on continued technical selling and persistent weakness in cash fundamentals, but saw a round of pre-weekend short covering.
- December corn fell 4 ½ cents to $4.97 ¾, losing 30 ½ cents for the week.
- November soybeans fell 5 ¾ cents to $12.78 ¼, hitting a four-week low and extending its weekly loss to 40 ¾ cents.
- December soybean meal shed $5.80 to end at $347.50, hitting a four-week low and losing $23.50 for the week.
- December soybean oil rose 124 points to 68.62 cents, up 78 points for the week.
- December SRW wheat rose ¼ cent to end at $6.83, down 20 ¼ cents on the week.
- December HRW wheat fell 2 ¼ cents to close at $7.35 ¼, seeing a weekly loss of 26 ¾ cents.
- December spring wheat futures rose 1 1/4 cents to close at $6.98, down 15 ½ cents on the week.
- December cotton futures gained 112 points on short covering to end at 78.88 cents after hitting a three-month low, leaving the contract with a weekly fall of 376 points.
- December live cattle ended $1.70 lower to $221.475, dragging the contract to a weekly loss of 67 ½ cents. November feeder cattle dropped $5.20 to $331.15, losing 82 ½ cents for the week.
- December lean hog futures rose $1.20 to $70.125, gaining $1.10 on the week, seeing short covering after hitting a contract low on Thursday.
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Jobs data disappoints: The U.S. economy added 29,000 jobs in September, the Labor Department said Friday, well below the 84,000 forecast by Wall Street analysts. Job gains over the previous two months were revised down by 60,000. The unemployment rate rose to 4.2% from 4.1% in August. The report paints a picture of a steady but not red-hot labor market. Combined with a cooler-than-expected personal consumption expenditures index reading seen earlier in the week, the data led traders to further scale back bets on another rate hike when Federal Reserve policy makers meet later this month. Fed funds futures traders priced in just a 23% probability of a quarter-point hike on Oct. 28, down from 64% a week ago, according to the CME FedWatch Tool. That helped Treasury yields further back off recent multidecade highs and took some steam out of the dollar, which hit a 1 ½ year high this week.
- Don’t get ahead of yourself: It will take more than one relatively cool jobs report to derail further rate hikes given continued uncertainty over how surging fuel costs and other war- and tariff-related factors will feed through the economy in terms of inflationary pressures.
“In short, though the September employment report slightly disappointed, the picture of a stable labor market remains very much intact, particularly when coupled with recent readings from other key indicators such as ADP and jobless claims,” wrote economists at Deutsche Bank, in a note. “Indeed, there are even some tentative signs of tightening in certain sectors. In turn, Fed officials are likely to remain squarely focused on inflation. We continue to expect two more 25bp (basis point) rate hikes over the next couple of quarters.”
CME suspends 24/7 oil-trading plan: In sad news for anyone itching to trade oil around the clock and through the weekend, CME Group on Friday suspended its plans for a 10-barrel crude contract after industry participants expressed concerns the product could serve to increase risk. In a statement, CME Group Chairman and Chief Executive Terry Duffy said the contract was created to provide a transparent, regulated alternative to the 24/7 oil contracts that other venues have appeared elsewhere, whether as onshore prediction markets or offshore perpetuals, which are illegal for U.S. participants.
- “We had hoped to provide a safer, more transparent alternative, within the U.S. jurisdiction and CFTC oversight,” Duffy said. “However, based on extensive conversations with industry participants, we have determined that key constituents are concerned that introducing 24/7 trading in energy without further due diligence could create unintended consequences, possibly introducing additional risk in the marketplace.”
Wettest month in 112 years: Excessively wet weather has delayed harvest efforts in the western Corn Belt, with Iowa at the epicenter. The National Weather Service said Des Moines recorded its wettest calendar month in 112 years, with the official site at the city’s airport recording 14.5 inches of rain in September. It was also the third-wettest month on record, behind only 15.79 inches in June 1881 and 14.81 inches in September 1914. Some much needed drying is expected to occur, with few rain chances in coming days and the NWS 8-to-14 day forecast pointing to below-normal precipitation. The drier forecast put some pressure on corn and soybean futures heading into the weekend.
- Blame it on El Niño: Meteorologist Eric Snodgrass says El Niño was fueling the extreme weather seen in the western Corn Belt and emphasized that the phenomenon hasn’t peaked yet. Snodgrass, senior science fellow at Nutrien, said he is worried about the impact the deluge may have on the crop. “When you look at the temperature and precipitation combination to finish the season, it’s not one that continued to put on more yield. It may have put on more test weight, may have made some bigger kernels, but other than that, I’m not sure.” Read more: Record El Niño behind historic rains stalling harvest across the U.S.