China Pauses Purchases of U.S. Ag Commodities
June 1st, 2020
OPEC and Russia are working to extend the current production cuts for another two months. Despite production falling these countries know there is still a glut of oil that needs to be worked off and they need to continue to limit supplies all they can. But it is a very delicate balance, and everyone does not has the same opinion on the outlook.
China has reacted to the United States’ actions with respect to changes on how the US views Hong Kong. The Chinese government has told major state-run agricultural companies to pause purchases of some American farm good including soybeans and pork.
The Baker Hughes Rig count was down again this past week, the eleventh week in a row of declines. They reported that oil rigs fell by 15 to a total of 222. The fewest rigs since June 2009 and now down 461 (67%) since the middle of March.
On Friday the energy markets had a big up day as energy prices had an impressive recovery in May. Crude prices were up roughly 88% in May, which is a big one month gain. You need to go back to 1990 during the Gulf War in September when crude rallied 44.6%. Positive economic outlooks as cities open back up and demand returns are supporting the rebound. The massive production cuts have also helped to support the rally in prices.
The EIA reported the US crude oil production in Mach fell by 28,000 bpd or 0.2% to 12.716 million bpd, the lowest level since October. Oil output fell in most states, and in federal waters in the Gulf of Mexico, but increased in Texas. Output in Texas increased by 1.2% to 5.42 million bpd in March. Monthly gross natural gas production in the US Lower 48 states increased for the first time in four months to 105.41 billion cubic feet per day in March from 105.21 billion cubic feet per day in February.