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Vegoils/crude jostle for pole position to the downside

Monday’s sharp vegoil selloff was trumped by an even steeper drop in mineral oil markets as Chinese demand worries compounded concerns over a looming surge in Iranian crude oil exports, dragging the nearby BOGO spread back into the $180s/t this morning.

Immediate supply fundamentals look likely to outweigh demand considerations in both markets. In agriculture, markets remain under pressure as US weather conditions have improved, with Asian expectations pointing to a bearish combination of higher July palm oil production, lower exports and increased stockpiles.

Brazilian soybean harvest expectations meanwhile continue to mount, which will put more pressure on US export prospects particularly if Chinese end-user demand starts to wobble. Front month US bean oil prices are now only marginally higher than the circa 29.50 cent/lb lows they plumbed at the end of January.

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