JPMorgan said that the main reason for this decline was due to the decrease in crude oil and refined product inventories. The global available days of oil and refined products in June decreased sharply by 2.5 days, the largest monthly decline in four years.
Commodities ushered in a wave of bull market in the first half of this year, but the market cooled off in June. JPMorgan pointed out in its latest report that global commodity inventories, except for China, are falling rapidly.
JPMorgan pointed out in its report on July 5th:
In June 2024, the available days of global commodity inventories remained at 65.4 days, almost unchanged from 65.3 days in May.
However, if excluding the Chinese market, the available days of global commodity inventories fell by 3.5% month-on-month to 61.3 days, the lowest level in four months and the largest decrease in 31 months.
In terms of commodity categories, JPMorgan said that this decline is mainly due to reduced inventory of crude oil and refined products:
The available days of global oil and refined oil fell sharply by 2.5 days in June, the largest monthly decrease in four years. The inventory in the OECD region continued mainly due to refining activities to meet the demand of the Northern Hemisphere summer.
With the decrease of crude oil inventory, crude oil prices have remained strong in recent period, with Brent oil futures rising to $86/barrel. Some analysts pointed out that crude oil consumption in the third quarter will still be in the peak season, and further destocking will support oil prices to rise.
In terms of other commodities, supplies of cotton and other agricultural products as well as copper, nickel and other basic metals have increased:
In terms of agricultural products, the available days of agricultural product inventories have increased in both monitoring indicators due to increased supply of cotton. Also, due to the increased supply of copper and nickel, the available days of basic metal inventories have also increased.
In addition, JPMorgan pointed out that although commodity inventories have seasonality, inventories outside of China are declining faster than usual:
Commodity inventories are inherently seasonal. From a seasonal perspective, the availability of inventories in June usually remains stable, with an average year-on-year growth rate of 0.12% over the past five years, while the global commodity inventory monitoring (GCIM) excluding China usually declines by about 1.06% month-on-month.
The availability and trend of GCIM in June 2024 increased by 0.06% year-on-year. However, the inventory decline rate of GCIM outside of China is much faster, with a month-on-month decline of 3.5%, which is more than three times the seasonal standard.
Editor/ping