20 May 2020
- Supply has improved in the last 2 weeks which has imposed a temporary ceiling on the price. Any bull case is undermined by the concern that planting conditions and preliminary yield estimates favour a strong new crop.
- Our short-term demand assessment for up and mid-stream demand remains strongly bearish. This is based on both spot and forward demand assessment. We notice a sharp drop in our proprietary Buying Pressure Index for the physical market which can be partially explained by the lack of credit, as discussed on several occasions. What we expect to see next is not encouraging.
- The macroeconomic environment remains challenging. Evidence continues to suggest that credit is not expanding anywhere near the amount and speed suggested by many governments and/or central banks around the world, hence the suppressed demand. This is partially incorporated into our Forward Demand view. See the Chart of the Week for the recent trend. On a positive note, we can mention the recent movements on the FX market which will spur end-user demand.