Biden proposes a $6t budget for 2022 to support commodities

Increasing demand optimism has offered support to the market, with reports that President Biden will propose a $6 trillion budget for the 2022 fiscal offering further support to the commodities complex. However, optimism about demand is not due to synchronous global rebound hopes. Instead, it’s the reopening in the U.S. that seems to be buoying sentiment.

On May 28, NYMEX WTI is trading at its highest levels since early March, with the market trading above $67/bbl.

The demand outlook for the U.S. remains supportive, with the economy continuing to reopen. Meanwhile, the summer driving season is starting, which should provide a further rise to gasoline demand. The 4-week average demand for gasoline recently passed the 9MMbbls/d mark for the first time since March 2020.

Next week’s big event for the market is the OPEC+ meeting on June 1, where the group will decide whether they will continue to raise output over June and July. The group is likely to boost output by 700Mbbls/d in June and then by a further 840Mbbls/d in July.

Industrial metals increased after Biden’s announcement

Industrial metals rose after reports that President Biden plans to unveil a $6 trillion budget for the coming fiscal year. LME base metals increased about 3% after the news. LME 3M copper returned to above $10,000/t yesterday and continued to find support from increasing supply risks in Chile.

Meanwhile, iron ore surged yesterday on both SGX and DCE, presumably supported by officials once again stepping up efforts in curbing steel output.

CBOT corn increased by more than 6% yesterday, with the market taking comfort in a USDA report noting strong export sales over the week. It has helped to ease concerns over some cargo cancellations announced earlier. Net sales of corn for the week ending 20 May totaled a little more than 6.2mt, which is the second-biggest number seen going as far back as 1990.