Weekly highlights - What would a leap in oil to $150/Bbl mean for grains?

Weekly Summary of Our Analysis & Forecasts

Could oil prices really jump above $150/Bbl? ?

The World Bank this week put as its central 2024 oil price forecast that Brent crude would average $81/Bbl, a little behind Friday’s spot price of about $87/Bbl.

However, it added that there was potential for prices to jump as high as $157/Bbl if the Israel-Hamas war escalates “into a regional conflict that sharply disrupts oil supply”. ?

It saw potential for lesser price spikes too, with a cut in output similar to that caused in 2003 by the Iraq War likely to lift Brent crude to about $110-120/Bbl. ?

The path that oil prices do tread is a matter of substantial importance to grain markets ahead. ? Energy markets have a significant impact on farmers’ cost of production, through determining the price of inputs such fertilizers as well as direct fieldwork costs, and thence the prices that grain markets need to reach to incentivize plantings. ?

This equation is already under the spotlight in Brazil for 2024. ?

Energy markets are a key influence on demand too, not least in demand for biofuels, which become more profitable to make when oil prices outperform grain prices. ?

Little wonder that global ethanol production has been strong of late, a factor that CRM Agri has been exploring in its Weekly Grain Outlook and UK Grain reports. ?

CRM Agri has also, in its Weekly Oilseed Outlook, explored why rapeseed prices have, until lately, attracted pressure, despite their use largely in making biodiesel.