Oil market on fire
Petroleum prices exploded to a three-year high over $74 per barrel Friday morning on supply fears spanning the globe. Political unrest in Libya and Venezuela are restricting exports from those nations, while a major Canadian production facility is offline as well.
More dramatically, the Trump administration announced that it wants to stop U.S. trading partners from buying Iranian crude oil by November as part of the re-imposed sanctions against Iran. The Middle Eastern nation is the world’s fifth-largest producer of oil, and cutting off the flow of its petroleum to Europe, Japan, South Korea, and India will force them to find new sources, further boosting prices.
Many had been hoping that global demand could be met by a jump in production from Russia and the Organization of the Petroleum Exporting Countries. However, the cartel announced last week that it was only increasing production by about 600,000 barrels per day, an increase that will likely leave the world hungering for more. This was likely OPEC’s desire, as they historically restrict supply to benefit from more profitable prices.
These sharply higher oil prices will translate into higher prices for gasoline, diesel fuel, propane, and jet fuel, ultimately hitting consumers on numerous fronts.
Grain prices rally
On Friday morning, the U.S. Department of Agriculture updated its estimates of this year’s planted acreage for corn, wheat, and soybeans.
While most of the report matched expectations, corn acreage jumped by more than a million acres to 89.12 million acres compared to the previous estimate, suggesting that this year’s stellar corn crop is even larger than previously thought.
Despite the jump in corn acreage, prices rose by almost 10 cents, suggesting that investors and end users are seeing current corn prices as a relative bargain. This may give some hope to farmers who recently watched corn lose over 50 cents per bushel in value and soybeans eviscerated by $2 per bushel as trade disputes and spectacular growing conditions threaten to leave the U.S. awash in grain this fall after harvest.
Meanwhile, wheat prices jumped more than 20 cents per bushel on news of lower European production.
Opinions are solely those of the writers. Walt & Alex Breitinger are commodity futures brokers with Paragon Investments
in Silver Lake, Kan.