LSGO futures, set to settle on January 24, witnessed a fluctuation before stabilizing at $811 per metric ton, aligning with the levels of the previous weeks, see. Figure 1.
Figure 1: Historical Settle Per Contract
The initial dip in LSGO futures was attributed to indications of a decline in demand. Contributing factors included data from the American Petroleum Institute (API), which signaled a decrease in U.S. fuel consumption as winter approached. Additionally, there was a noteworthy weekly surge in U.S. crude stockpiles, reaching the highest point since February and accumulating nearly 12 million barrels by November 3rd.
Compounding the situation, China’s economic resurgence exhibited signs of faltering, marked by a return to deflation in October despite ongoing economic stimuli from Beijing. Although China maintained consistent oil imports, concerns grew regarding a potential decline in crude demand due to substantial reserves and the likelihood of reduced export allocations for refineries.
Simultaneously, recent data from Europe indicated a weakening trend in retail sales and a contraction in business activity within the eurozone over the past month. These developments heightened the probability of a recession in this pivotal energy-consuming region.
However, a positive turn occurred as LSGO prices rebounded. This recovery was fueled by updated forecasts from OPEC and the International Energy Agency (IEA), which predicted an increase in oil demand for the years 2023 and 2024. The upswing was further reinforced by the U.S. investigation into suspected breaches of Russian oil sanctions and Iraq’s endorsement of OPEC’s strategy for reducing oil supply.
Read more on LSGO’s futures’ impact on the biodiesel complex in Vesper’s latest Market Highlights.