Characteristics of the dynamics of price fluctuations in the world market of raw materials for 2020

Despite technological progress, gradual automation of production and industry, fuel and energy and raw materials account for a significant share of GDP, especially those with powerful subsoil oil, natural gas, metals and minerals. In addition to these resources, the raw material base also includes agricultural products. If we give a complete classification, the concept of "raw materials" can include:

  • Fuel and energy

  • Mineral

  • Artificial-industrial (rubber, plastics)

  • Agricultural (grain, meat, fish, etc.)

2020, in addition to the pandemic, was also marked by a global economic downturn, and the level of GDP of countries with significant reserves of raw materials depends on the market price for it.

Oil

2020 turned out to be quite a turbulent year for oil price fluctuations. At the beginning of the year, they gave $ 66.15 per barrel of oil, but by April the price had fallen to a record low of $ 22.72 per barrel. Over the next five months, oil rose to $ 45.75 a barrel in September, but fell to $ 40.87 the following month, asking $ 36.56 a barrel as of early November. If you go into detail, the price fluctuations depended on the following events. After the assassination of the Iranian military figure K. Suleiman on January 3, 2020, forbidding data, Brent North Sea crude oil prices rose 3.06% to $ 68.28. The price of a barrel of West Texas oil WTI rose by 2.75% to $ 62.87. On January 8, after Iran's missile attack on two US military bases in Iraq, the price of Brent on the London Stock Exchange ICE Futures is $ 69.06 per barrel, which is $ 0.79 (1.16%) higher than the price at the close of the previous session. WTI oil futures rose in February on electronic trading on the New York Mercantile Exchange (NYMEX) by $ 0.52 (0.87%) to $ 60.13 per barrel. Following the results of the previous session, their price fell by $ 3.09 (by 4.93%), ending the day at $ 59.61 per barrel. Following the imposition of additional sanctions on Iran by the United States and the reduction of the risks of a new military conflict between those states,the price of March futures for Brent oil on the London Stock Exchange ICE Futuresis $ 65.15 per barrel, which is $ 0.22 (0.34%) lower than the closing price of the previous session. Following the results of trading on Thursday, futures decreased in price by $ 0.07 (0.11%) to $ 65.37 per barrel. Futures for WTI oil in February at electronic trading on the New York Mercantile Exchange (NYMEX) fell by $ 0.2 (0.34%) to $ 59.36 per barrel. Prior to the close of the previous trading, the contract price was $ 59.56 per barrel, down $ 0.05 (0.08%) compared to the previous session.

January 14 after signing trade agreement between the United States and Chinaprices went up a bit. The price of March futures for Brent oil on the London Stock Exchange ICE Futures is $ 64.27 per barrel, which is $ 0.07 (0.11%) higher than the price at the close of the previous session. At the end of trading on Monday, futures fell in price by $ 0.78 (1.2%) to $ 64.20 per barrel. Futures on WTI in February at electronic trading on the New York Mercantile Exchange (NYMEX) increased by $ 0.01 (0.02%) - to $ 58.09 per barrel. Prior to the close of the previous trading, the contract price was $ 58.08 per barrel, down $ 0.96 (1.63%) compared to the previous session. The US Treasury Department on Monday excluded China from the list of currency manipulators, which had an additional positive effect on the mood of market participants, but the next day prices went down again as investors began to fear that it would not meet demand. In mid-January, oil is also rising due to new signals of rising tensions in the Middle East. The price of March futures for Brent oil on the London Stock Exchange ICE Futures is $ 65.65 per barrel, which is $ 0.80 (1.23%) higher than the price at the close of the previous session. Following the results of trading on Friday, futures rose in price by $ 0.23 (0.36%) to $ 64.85 per barrel. Futures for WTI oil in February at electronic trading on the New York Mercantile Exchange (NYMEX) rose by $ 0.64 (1.09%) - to $ 59.18 per barrel. Prior to the close of the previous trading, the contract price was $ 58.54 per barrel, an increase of $ 0.02 (0.03%) compared to the previous session, but a little later 65 per barrel, which is $ 0.80 (1.23%) higher than the price at the close of the previous session. Following the results of trading on Friday, futures rose in price by $ 0.23 (0.36%) to $ 64.85 per barrel. Futures for WTI oil in February at electronic trading on the New York Mercantile Exchange (NYMEX) rose by $ 0.64 (1.09%) - to $ 59.18 per barrel. Prior to the close of the previous trading, the contract price was $ 58.54 per barrel, an increase of $ 0.02 (0.03%) compared to the previous session, but a little later 65 per barrel, which is $ 0.80 (1.23%) higher than the price at the close of the previous session. Following the results of trading on Friday, futures rose in price by $ 0.23 (0.36%) to $ 64.85 per barrel. Futures for WTI oil in February at electronic trading on the New York Mercantile Exchange (NYMEX) rose by $ 0.64 (1.09%) - to $ 59.18 per barrel. Prior to the close of the previous trading, the contract price was $ 58.54 per barrel, an increase of $ 0.02 (0.03%) compared to the previous session, but a little lateragain the price began to decline. At the end of January, due to the spread of Covid - 19 in China, the price went down by 2%. The price of March futures for Brent oil on the London Stock Exchange ICE Futures is $ 59.43 per barrel, which is $ 1.26 (2.08%) lower than the closing price of the previous session. Following the results of trading on Friday, futures fell in price by $ 1.35 (2.18%) to $ 60.69 per barrel.

WTI oil futures for March trading on the New York Mercantile Exchange (NYMEX) fell by $ 1.20 (2.21%) to $ 52.99 per barrel. Prior to the close of the previous trading, the contract price was $ 54.19 per barrel, down $ 1.4 (2.52%) compared to the previous session. This is the first reduction in oil prices in the wake of the pandemic. In early February, oil prices began to rise gradually in the wake of the fight against the pandemic. Brent futures rose 2.2% to $ 56.51 a barrel, up 2.4% in the previous session, while on the WTI - by 2.7% to $ 52.13 per barrel, showing an increase of 2.3 % on Wednesday. In Asian markets, on a wave of optimism, oil suspected 1%. And April futures for Brent oil on the London Stock Exchange ICE Futures rose by $ 0.71 (1.33%) - to $ 53.98 per barrel. On Monday, their price fell by $ 1.2 (by 2.2%), closing at $ 53.27 per barrel. WTI oil futures for March trading on the New York Mercantile Exchange (NYMEX) rose by $ 0.62 (1.25%) to $ 50.19 per barrel. Following the results of the previous session, their price fell by $ 0.75 (by 1.49%), ending the day at $ 49.57 per barrel. The rise in prices is also influenced by OPEC's decisions to reduce production. At the end of February, prices fell again as the rapid spread of the coronavirus in a number of countries outside China caused investors to worry about declining demand. The price of a barrel of Brent oil in May was $ 56.53 (-2.43%). A barrel of WTI April oil traded at $ 52, 14 (-2.30%). Preliminary trading in the standards ended at $ 57.94 and $ 53.38, respectively.

In March, amid failed negotiations between OPEC and Russia, the world's largest oil exporter began a general price war on March 7, significantly lowering its own prices. In this way, Saudi Arabia is trying to encourage refineries in Europe, Asia and the United States to buy Saudi oil. Within hours of failing talks in Vienna, Riyadh had lowered so-called official selling prices by offering record discounts on some of the crude oil it sells around the world. "Saudi Arabia is now really starting a full-scale price war," -said the managing directoron the Middle East FGE Advisory Group Iman Nasseri. And on March 9, the price fell by 30 percent. The cost of a barrel of Brent oil (159 liters), which is extracted in the North Sea, was $ 32.83. This is $ 12.44 lower than the price of the same oil as of March 6. The price of American crude WTI oil also fell by $ 12.44 to $ 28.84. Analysts note that this is the largest percentage drop in the oil market since the 1991 Gulf War. The collapse of prices was caused by unsuccessful negotiations between OPEC + oil-producing countries. OPEC + members could not agree on a reduction in oil production. This, in particular, was insisted on by Saudi Arabia. Instead, Russia strongly opposed the reduction of production. Against the background of the coronavirus pandemic, the price of WTI oil fell by 3.9 percent, f ' Brent futures fell 4.9 percent. A barrel of WTI on Asian stock exchanges on Monday, March 30, traded for $ 20, a barrel of Brent - for $ 23. Oil is so cheap for the first time since 2002. In April, fluctuations in the pandemic wave and OPEC +'s decision to reduce production led to cheaper or higher oil prices. The price of June futures for Brent oil on the London Stock Exchange ICE Futures at the close on Thursday was $ 31.48 per barrel, down $ 1.36 (4.14%). WTI futures for May on the New York Mercantile Exchange (NYMEX) fell by $ 2.33 (9.29%) - to $ 22.76 per barrel. April 14 In April, fluctuations in the pandemic wave and OPEC +'s decision to reduce production led to cheaper or higher oil prices. The price of June futures for Brent oil on the London Stock Exchange ICE Futures at the close on Thursday was $ 31.48 per barrel, down $ 1.36 (4.14%). WTI futures for May on the New York Mercantile Exchange (NYMEX) fell by $ 2.33 (9.29%) - to $ 22.76 per barrel. April 14 In April, fluctuations in the pandemic wave and OPEC +'s decision to reduce production led to cheaper or higher oil prices. The price of June futures for Brent oil on the London Stock Exchange ICE Futures at the close on Thursday was $ 31.48 per barrel, down $ 1.36 (4.14%). WTI futures for May on the New York Mercantile Exchange (NYMEX) fell by $ 2.33 (9.29%) - to $ 22.76 per barrel. April 14oil has risen in priceafter four days of negotiations, during which OPEC + countries managed to agree on a reduction in world oil production. The price of June Brent oil futures on the London Stock Exchange ICE Futures until 7:53 on Kyiv on Monday amounted to $ 32.81 per barrel, which is $ 1.33 (4.3%) higher than the previous session. During the session, price growth reached 8%.

WTI futures for May on the New York Mercantile Exchange (NYMEX) have risen in price so far by $ 1.09 (4.79%) - to $ 23.85 per barrel. On April 15 and 16, OPEC's "oil basket" traded in the price range of $ 17.51-17.73 per barrel. April 20 due to the crisis caused by the coronavirus pandemic, the world price of the brand's oilWTI droppedto an unprecedented level - almost "minus" 38 dollars per barrel. Subsequently, in the 20s of April, the price of oil continued to decline due to increasing commercial stocks. The price of a barrel of Brent June oil was $ 16.61 (-14.07%). A barrel of WTI June oil traded at $ 11.20 (-3.20%). Preliminary trading ended at $ 19.33 and $ 20.43, respectively. The market collapse, which began with a historic fall below zero in May futures on the WTI, has spread to June contracts, as well as to European Brent and spot deals. This showed that this is not a technical failure, but a strengthening market trend. At the end of April, the price of a barrel of Brent July oil on the London Stock Exchange ICE was $ 22.54 (-2.30%). A barrel of WTI June oil was traded on the New York Stock Exchange NYMEX for $ 11.28 (-11.82%).

The following trends in price fluctuations took place in May. First, amid deteriorating trade relations between the United States and China, oil has fallen in price. The price of July futures for Brent oil on the London Stock Exchange ICE Futures is $ 25.98 per barrel, which is $ 0.46 (1.74%) lower than the price at the close of the previous session. WTI oil futures for June trading on the New York Mercantile Exchange NYMEX fell by $ 1.35 (6.83%) to $ 18.43 per barrel. At the close of the previous auction, the contract price was $ 19.78 per barrel, rising by $ 0.94 (5%). Second, rising demand in China and Saudi Arabia's promises to cut production have led to a slight rise in prices. As of May 20, the data are as follows - the price of July futures for Brent oil on the London Stock Exchange ICE Futures is $ 34.91 per barrel, which is $ 0.26 (0, 75%) above the closing price of the previous session. WTI oil futures for July in electronic trading on the New York Mercantile Exchange NYMEX rose by $ 0.16 (0.5%) - to $ 32.12 per barrel.

The summer period was characterized by a gradual rise in oil prices. The price of August futures for Brent oil on the London Stock Exchange ICE Futures is $ 40.20 per barrel, which is $ 0.21 (0.53%) higher than the closing price of the previous session. WTI oil futures for July in the electronic trading on the New York Mercantile Exchange NYMEX rose by $ 0.02 (0.05%) and amounted to $ 37.43 per barrel. Butaccording to the oil cartel secretariat, the price of the "basket" OPEC, which is the arithmetic mean of the physical prices of 13 grades of oil, on June 15 was $ 35.09. US per barrel. In July-August, prices ranged from $ 36-40 per barrel. The dynamics of prices for the last four months can be seen in the chart.

 

In the period from October 15 to November 14the average price of the Urals was $ 40.04 per barrel. The calculation of the average price determines the amount of export duty for the next month for Russian oil, but the tax maneuver provides for its gradual reduction. The average price of Russian Urals oil for the monitoring period from November 15 to December 14, 2020 was $ 47.05 per barrel or $ 343.4 per ton.

Regarding certain forecasts for 2021, the World Bank forecasts that the price of a barrel of oil in 2021 will be $ 41 and $ 44 per barrel. The bank gave such a forecast inpublishedthem reports on the prospects of commodity markets. "Overall, oil prices are expected to average $ 44 per barrel in 2021 and about $ 41 per barrel in 2020. Demand is likely to grow at a rather slow pace as the development of the tourism and travel sector continues to be hampered by health problems, ”the report said. The new World Bank forecast is much better than the estimates it gave in June. Then he predicted them at $ 32 in 2020 and $ 38 in 2021. The World Bank noted that oil prices in the near future will support factors such as a possible extension of the OPEC + agreement to reduce oil production at current levels and reduce oil production in the United States. Financial analysts have predicted that in 2021, global economic activity will return to the level it was before the COVID-19 pandemic. They also predict an increase in demand for gas and coal. "Almost all commodity prices recovered in the third quarter of 2020 after a sharp decline at the beginning of the year. Crude oil prices have doubled since April in response to supply cuts, but remain well below their pre-pandemic level. According to the World Bank forecasts, in 2021 prices for metals and agricultural products will increase slightly: by 2 and 1 percent, respectively.

Natural gas

Spot gas prices in Europe have fallen below summer lows since 2016, putting pressure on Russian fuel suppliers' profits. For a million British thermal units (MMBTU) on the TTF hub now give about $ 3.9. Gazprom and Novatek are at risk. The main reasons for the reduction in gas prices in 2019-2020 are the following:

  • The growing number of large private gas companies and the rapid increase in production as new technologies spread.

  • The new boom in shale oil production (2016-2018) contributed to a sharp increase in the production of associated petroleum gas, which brought its cost at local hubs to almost zero.

  • Combined with the negative impact of relatively warm weather, the second wave of lower prices at the main site on NYMEX was obtained.

  • In an attempt to maintain profitability and business sustainability, independent producers are actively hedging future deliveries by selling derivatives on natural gas on the stock exchange, thus putting additional pressure on quotations.

The dynamics of natural gas prices on the New York Mercantile Exchange is illustrated by the following chart:

 

Iron Ore

The COVID-19 pandemic has hit iron ore sales and production quite hard. Iron ore supplies from Brazil fell by almost a quarter in May due to the crisis,notes Macquarie analyst Serafino Capoferri.According to him, Brazil exported 15.27 million tons of iron ore in the three weeks of May, which is 19.4 million tons less than a year earlier, despite the fact that in May last year supplies were already lower than usual due to the accident at the dam Vale SA. "The situation in Brazil is almost out of control," said Capoferri. According to him, local mines are experiencing serious difficulties because they require more active use of human labor than, for example, Australian. Brazil's Vale, the world's largest producer of iron ore, announced in April that due to the pandemic, its production this year will be about 40 million tons less than expected and will amount to 345-370 million tons. The World Bankpredictsiron ore prices at $ 107 / t in 2020. This is stated in the review of Commodity Markets Outlook for October, published on the website of the credit institution. Ore prices in the third quarter of 2020 increased by 25% compared to the weak first and second quarters. There are two reasons - the steady growth of demand from Chinese steelmakers and the threat of supply disruptions. However, Ukrainian and Chinese companies have won the crisis quite well. In the first quarter, Ukrainian companies increased revenues from iron ore exports by 16.7% compared to the same period last year - up to $ 881.7 million. In January-March, Ukrainian metallurgical enterprises exported 11.2 million tons of iron ore, which is 18, 2% more than in the first quarter of 2019. China's share in the structure of ZRS exports in the first quarter increased more than 2.5 times - up to 52%. Some of Europe's steel mills have been locked down, while the Chinese government has long presented a program to support Chinese business and a state infrastructure strategy that includes large-scale construction projects. This will provide Chinese metallurgists with the required number of orders and open up new opportunities for premium product exporters. Another important factor influencing the price of September futures on the world's major iron ore exchanges (Dalian and Singapore) was the political battles over future Australian exports to China, which could fall under the duty that will be the Chinese government's response to Canberra's 5G blockade. Huawei. At the same time, exports of Ukrainian ore decreased by UAH 2.65 billion in monetary terms, compared to the result of 9, UAH 83 billion in April. Thus, we can conclude that the decline in exports by almost a third (27%) was rather the result of a significant reduction in demand for commodities as a result of the pandemic, which was expected at the beginning of the pandemic. Prices for iron ore as of September 18, 2020 were at $ 124.50 per ton, which was last observed in 2014.According to the latest dataThe World Steel Association (WSA), between January and July 2020, world steel production fell by 5.3% year on year to 1,027 million tons, while steel production in China grew by 2.8% to 593 million tons. Resumption of steel production may cause an acute demand for iron ore. On December 21, iron ore rose by 7.8% to $ 176.9 / t.

 

The price of ore for 2020

Coal

Energy coal with a calorific value of 6,000 kcal / kg rose in North-West Europe (PCE) by the end of September by about 15% compared to the last days of August, to 57.23 US dollars per ton (cif Amsterdam - Rotterdam - Antwerp ),according to Argus. Demand for coal in European countries increased in early autumn. Coal-fired power plants in Germany, France, the United Kingdom and Spain in September, for the first time in 2020, exceeded the annual level. The total load of coal-fired power plants in these countries this month averaged 7.1 GW, which is 41% more than in the same month last year. The growth of coal generation is facilitated by the reduction of electricity production at European nuclear power plants, as well as the strengthening of coal's position in fuel competition with natural gas. Gas generation in Europe is becoming less profitable compared to coal-fired power plants due to the sharp rise in prices for natural gas in the region's spot market. Natural gas prices at the TTF trading hub in the Netherlands have so far risen by about 23% compared to the end of last month, exceeding $ 150 per thousand cubic meters. At the same time, imports of thermal coal in European countries are rapidly declining. Solid fuel supplies from Russia through the ports of the North-West region over the past eight months decreased by 21% compared to the same period in 2019, to 37.6 million tons, according to railway freight forwarders. Strikes at one of Colombia's major coal mines have also limited coal supply in Europe. As a result, coal reserves in large PZE ports are gradually declining, reaching 5.9 million tons at the end of September, which is 1.4 million tons less than a year earlier. Solid fuel supplies from Russia through the ports of the North-West region over the past eight months decreased by 21% compared to the same period in 2019, to 37.6 million tons, according to railway freight forwarders. Strikes at one of Colombia's major coal mines have also limited coal supply in Europe. As a result, coal reserves in large PZE ports are gradually declining, reaching 5.9 million tons at the end of September, which is 1.4 million tons less than a year earlier. Solid fuel supplies from Russia through the ports of the North-West region over the past eight months decreased by 21% compared to the same period in 2019, to 37.6 million tons, according to railway freight forwarders. Strikes at one of Colombia's major coal mines have also limited coal supply in Europe. As a result, coal reserves in large PZE ports are gradually declining, reaching 5.9 million tons at the end of September, which is 1.4 million tons less than a year earlier.

 

 

Cereals

In 2020, due to unfavorable weather conditions, lack of moisture in winter and the consequences of quarantine restrictions, MEDT indicates a decrease in grain production compared to 2019 and does not expect a gross harvest of 75.1 million tons. In March, the Ukrainian grain market reacted to world events. Grain prices in the Black Sea region began to fall after quotations on world exchanges due to the coronavirus Covid-19. However, this decline was replaced by periodic setbacks to higher prices. Finally, in April 2020, there was a slow rise in prices for some major crops. By the end of the summer, prices for agricultural crops have reached their multi-year highs and are already at fairly high levels in the fall. In Ukraine, the purchase price for wheat of the 4th class, as of May 15, 2020, increased by 7% to the price on the same date last year per ton and by 2% to April 2020 - to 5.369 thousand UAH. The purchase price for Class 3 wheat increased by 5% compared to the same date last year and by 3% compared to the previous month - up to UAH 5,577 thousand per ton. The purchase price for Class 2 wheat increased during the month by 3% - to 5,739 thousand per ton.

The price of Class 3 barley increased by 3% compared to April, 1% for the last week, and decreased by 14% over the year - to UAH 4,466 thousand per ton. The same dynamics of the price of sunflower: an increase of 3% over the last month and 1% for the week, but compared to the same period last year - a decrease of 2% to 8,928 thousand UAH per ton. Soybeans rose in price by 5% in the current month, by 13% in the past year - to UAH 10,334 thousand per ton.

Almost the largest dynamics of purchase prices for buckwheat: + 1% for the week, + 8% to last month and + 172% compared to May 2019 - up to 18.2 thousand UAH per ton.

 

 

 

 

 

So we can draw the following conclusions. First, prices for energy and fuel resources for this year fell significantly and fluctuated throughout the year. Oil fluctuations were especially significant. Second, price trends for industrial and metallurgical raw materials differ significantly. If the price of iron ore has risen in 2020 to the highest level in 10 years, coal prices are declining due to the refusal of some countries to import. On the contrary, price fluctuations in grain resources are going up compared to 2019 and this is quite noticeable not only in global trends but also in the Ukrainian agricultural market, although grain exports will provide Ukraine with additional financial income due to the economic crisis in developed countries.

 

Dmitry Lagosha for UIP