Analys

The price of Robusta and Arabica coffee

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12 år sedan

den

5 december, 2013

Arabica’s years-long downtrend has led the price of this coffee to its lowest level since 2006 (see chart 10 below). For a brief time it was even feared that the price would fall below the USD1 per pound mark. Moreover, the price looks like it will remain muted going forward as well: if Brazil’s current low-yield year for Arabica couldn’t boost prices and the roya (coffee rust) epidemic affecting a large part of Central America was only able to lift them briefly, we see little hope for a trend reversal in 2014. Not only is production in Columbia likely to increase further in 2014, but above all Brazil is slated for a high-yield year.

In fact, the term “low-yield year” has lost much of its edge due to the flattening of the 2-year cycle. This year Brazil posted a record high for production in such a low-yield year and in all probability will post a record-high for production in a high-yield year in 2014. In terms of aggregate coffee volume this could translate to an increase of 10m bags to 57m bags, and some estimates even go as high as 60m bags or more. That is anything but a signal of scarcity (see chart 11 below). Such estimates are supported not only by the good weather conditions so far, but also by the overall improvement in the state of plantation. The good state of plantations, however, is due not least to investments made following the high prices of 2011. The longer the low-price phase persists, the more the investment “dividend” will shrink.

As a minimum, the current low price phase will lead to lower yields in the medium term due to scrimping on fertilizer and crop protection. So far the plantations have continued to persevere despite prices that have often fallen below production cost – but they won’t be able to hold on indefinitely. The marked increase in production costs of an estimated 12% yoy combined with low prices is likely to lower the profitability of coffee farming further. Thus, for the longer run, the ICO views the assumption of a higher coffee supply as questionable. But for now, prices are not budging, not even after the auctions of the Brazilian government, in which options were arranged for planters to deliver 3 million bags to state stockpiles in March 2014. According to the ICO, this non-reaction indicates that the market is underestimating the impact of Brazil’s policy, which it believes is likely to lead to a “precarious” balance.

But that is still a long way off: Following a number of deficit years, 2012/13 has already ended with surplus of about 3m bags as estimated by the ICO. It is still not clear how global production volume will turn out in 2013/14, as increases in Vietnam and Columbia – the latter finally having emerged from its roya Odyssey of several years, which necessitated new plantings of more robust strains – will be offset by decreases in Brazil and currently roya-plagued Central America.

At present it seems there could also be surpluses in 2013/14 and 2014/15. The more diminished outlook for the years thereafter should, however, allow prices to rise slowly, so that after an intermittent low during the Brazilian harvest in 2014 we expect the price of coffee to recover to 110 US cents per pound in Q4 2014 and continue to rise thereafter.

Since summer, Robusta prices have moved in a similarly negative fashion as Arabica prices after far outperforming them for a very long period. Nonetheless, Arabica prices remain low relative to Robusta prices when compared to their history. This should lead to a substitution of Arabica for Robusta in coffee consumption. The ICO believes this trend is already recognisable. The recent recovery of Robusta prices was largely due to the fact that Vietnam’s latest export numbers came in low despite what seems to have been a record-high harvest. The policy of holding back is apparently paying off, at least in the short run. We doubt Robusta prices will be able to escape the pressure of a plenteous coffee supply in 2014 and don’t expect its price to recover until the second half of the year – to a level of USD1,600 per ton.

Relaterade ämnen:coffee commerzbank research

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Analys

Brent crude ticks higher on tension, but market structure stays soft

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3 dagar sedan

den

16 september, 2025

Redaktionen

Brent crude has climbed roughly USD 1.5-2 per barrel since Friday, yet falling USD 0.3 per barrel this mornig and currently trading near USD 67.25/bbl after yesterday’s climb. While the rally reflects short-term geopolitical tension, price action has been choppy, and crude remains locked in a broader range – caught between supply-side pressure and spot resilience.

Ole R. Hvalbye, Analyst Commodities, SEB

Prices have been supported by renewed Ukrainian drone strikes targeting Russian infrastructure. Over the weekend, falling debris triggered a fire at the 20mtpa Kirishi refinery, following last week’s attack on the key Primorsk terminal.

Argus estimates that these attacks have halted ish 300 kbl/d of Russian refining capacity in August and September. While the market impact is limited for now, the action signals Kyiv’s growing willingness to disrupt oil flows – supporting a soft geopolitical floor under prices.

The political environment is shifting: the EU is reportedly considering sanctions on Indian and Chinese firms facilitating Russian crude flows, while the U.S. has so far held back – despite Bessent warning that any action from Washington depends on broader European participation. Senator Graham has also publicly criticized NATO members like Slovakia and Hungary for continuing Russian oil imports.

It’s worth noting that China and India remain the two largest buyers of Russian barrels since the invasion of Ukraine. While New Delhi has been hit with 50% secondary tariffs, Beijing has been spared so far.

Still, the broader supply/demand balance leans bearish. Futures markets reflect this: Brent’s prompt spread (gauge of near-term tightness) has narrowed to the current USD 0.42/bl, down from USD 0.96/bl two months ago, pointing to weakening backwardation.

This aligns with expectations for a record surplus in 2026, largely driven by the faster-than-anticipated return of OPEC+ barrels to market. OPEC+ is gathering in Vienna this week to begin revising member production capacity estimates – setting the stage for new output baselines from 2027. The group aims to agree on how to define “maximum sustainable capacity,” with a proposal expected by year-end.

While the IEA pegs OPEC+ capacity at 47.9 million barrels per day, actual output in August was only 42.4 million barrels per day. Disagreements over data and quota fairness (especially from Iraq and Nigeria) have already delayed this process. Angola even quit the group last year after being assigned a lower target than expected. It also remains unclear whether Russia and Iraq can regain earlier output levels due to infrastructure constraints.

Also, macro remains another key driver this week. A 25bp Fed rate cut is widely expected tomorrow (Wednesday), and commodities in general could benefit a potential cut.

Summing up: Brent crude continues to drift sideways, finding near-term support from geopolitics and refining strength. But with surplus building and market structure softening, the upside may remain capped.

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Analys

Volatile but going nowhere. Brent crude circles USD 66 as market weighs surplus vs risk

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7 dagar sedan

den

12 september, 2025

Redaktionen

Brent crude is essentially flat on the week, but after a volatile ride. Prices started Monday near USD 65.5/bl, climbed steadily to a mid-week high of USD 67.8/bl on Wednesday evening, before falling sharply – losing about USD 2/bl during Thursday’s session.

Brent is currently trading around USD 65.8/bl, right back where it began. The volatility reflects the market’s ongoing struggle to balance growing surplus risks against persistent geopolitical uncertainty and resilient refined product margins. Thursday’s slide snapped a three-day rally and came largely in response to a string of bearish signals, most notably from the IEA’s updated short-term outlook.

The IEA now projects record global oversupply in 2026, reinforcing concerns flagged earlier by the U.S. EIA, which already sees inventories building this quarter. The forecast comes just days after OPEC+ confirmed it will continue returning idle barrels to the market in October – albeit at a slower pace of +137,000 bl/d. While modest, the move underscores a steady push to reclaim market share and adds to supply-side pressure into year-end.

Thursday’s price drop also followed geopolitical incidences: Israeli airstrikes reportedly targeted Hamas leadership in Doha, while Russian drones crossed into Polish airspace – events that initially sent crude higher as traders covered short positions.

Yet, sentiment remains broadly cautious. Strong refining margins and low inventories at key pricing hubs like Europe continue to support the downside. Chinese stockpiling of discounted Russian barrels and tightness in refined product markets – especially diesel – are also lending support.

On the demand side, the IEA revised up its 2025 global demand growth forecast by 60,000 bl/d to 740,000 bl/d YoY, while leaving 2026 unchanged at 698,000 bl/d. Interestingly, the agency also signaled that its next long-term report could show global oil demand rising through 2050.

Meanwhile, OPEC offered a contrasting view in its latest Monthly Oil Market Report, maintaining expectations for a supply deficit both this year and next, even as its members raise output. The group kept its demand growth estimates for 2025 and 2026 unchanged at 1.29 million bl/d and 1.38 million bl/d, respectively.

We continue to watch whether the bearish supply outlook will outweigh geopolitical risk, and if Brent can continue to find support above USD 65/bl – a level increasingly seen as a soft floor for OPEC+ policy.

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Analys

Waiting for the surplus while we worry about Israel and Qatar

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1 vecka sedan

den

10 september, 2025

Redaktionen

Brent crude makes some gains as Israel’s attack on Hamas in Qatar rattles markets. Brent crude spiked to a high of USD 67.38/b yesterday as Israel made a strike on Hamas in Qatar. But it wasn’t able to hold on to that level and only closed up 0.6% in the end at USD 66.39/b. This morning it is starting on the up with a gain of 0.9% at USD 67/b. Still rattled by Israel’s attack on Hamas in Qatar yesterday. Brent is getting some help on the margin this morning with Asian equities higher and copper gaining half a percent. But the dark cloud of surplus ahead is nonetheless hanging over the market with Brent trading two dollar lower than last Tuesday.

Bjarne Schieldrop, Chief analyst commodities, SEB

Geopolitical risk premiums in oil rarely lasts long unless actual supply disruption kicks in. While Israel’s attack on Hamas in Qatar is shocking, the geopolitical risk lifting crude oil yesterday and this morning is unlikely to last very long as such geopolitical risk premiums usually do not last long unless real disruption kicks in.

US API data yesterday indicated a US crude and product stock build last week of 3.1 mb. The US API last evening released partial US oil inventory data indicating that US crude stocks rose 1.3 mb and middle distillates rose 1.5 mb while gasoline rose 0.3 mb. In total a bit more than 3 mb increase. US crude and product stocks usually rise around 1 mb per week this time of year. So US commercial crude and product stock rose 2 mb over the past week adjusted for the seasonal norm. Official and complete data are due today at 16:30.

A 2 mb/week seasonally adj. US stock build implies a 1 – 1.4 mb/d global surplus if it is persistent. Assume that if the global oil market is running a surplus then some 20% to 30% of that surplus ends up in US commercial inventories. A 2 mb seasonally adjusted inventory build equals 286 kb/d. Divide by 0.2 to 0.3 and we get an implied global surplus of 950 kb/d to 1430 kb/d. A 2 mb/week seasonally adjusted build in US oil inventories is close to noise unless it is a persistent pattern every week.

US IEA STEO oil report: Robust surplus ahead and Brent averaging USD 51/b in 2026. The US EIA yesterday released its monthly STEO oil report. It projected a large and persistent surplus ahead. It estimates a global surplus of 2.2 m/d from September to December this year. A 2.4 mb/d surplus in Q1-26 and an average surplus for 2026 of 1.6 mb/d resulting in an average Brent crude oil price of USD 51/b next year. And that includes an assumption where OPEC crude oil production only averages 27.8 mb/d in 2026 versus 27.0 mb/d in 2024 and 28.6 mb/d in August.

Brent will feel the bear-pressure once US/OECD stocks starts visible build. In the meanwhile the oil market sits waiting for this projected surplus to materialize in US and OECD inventories. Once they visibly starts to build on a consistent basis, then Brent crude will likely quickly lose altitude. And unless some unforeseen supply disruption kicks in, it is bound to happen.

US IEA STEO September report. In total not much different than it was in January