Commodities Wrap 24 August: Coffee Jumps 5.9 Percent While Diesel Slides 4.8 Percent

By The Edge Research Team

Commodities split hard on Monday. Coffee rose 5.94 percent to 341.80 cents a pound, the largest single move in the complex, while at the other end heating oil fell 4.81 percent to 4.2787 dollars a gallon. Between those two poles sat a 10.75 point spread, on our calculation, across the seventeen contracts we track. Crude led the energy complex lower, with Brent down 2.22 percent at 92.29 dollars a barrel and West Texas Intermediate down 2.09 percent at 85.24 dollars, on a day when the United States rolled out a global sanctions plan focused on Iran, dubbed Operation Economic Outcast. Both benchmarks rose last week when that plan was trailed, and investors may have been taking profit on Monday, per CNBC.

Energy

The sharpest move in energy was not in crude but in the refined barrel. Heating oil, the ultra-low-sulphur diesel contract, fell 4.81 percent, more than twice the pace of the crude it is refined from. That compressed the distillate crack, measured here as a simple one to one spread of the ULSD contract against WTI rather than a full refining margin, which by our calculation narrowed from about 101.72 dollars a barrel on Friday to about 94.47 on Monday, a fall of roughly 7.25 dollars in one session. RBOB gasoline was steadier, down 2.03 percent to 3.28 dollars a gallon, and its crack narrowed by only about one dollar a barrel on the same one to one basis. Commonwealth Bank of Australia expects Brent to trade between 70 and 100 dollars a barrel in the second half of the year, per CNBC. Natural gas was the one energy contract higher at the capture, adding 0.14 percent to 2.777 dollars per million British thermal units, a move small enough to read as unchanged.

Metals

Precious metals went in different directions. Palladium led the complex, up 0.87 percent to 1,362.00 dollars an ounce, and gold added 0.30 percent to 4,694.80 dollars. Silver was the weak point, down 1.41 percent to 68.55 dollars, and platinum eased 0.37 percent to 1,888.60 dollars. Because gold rose while silver fell, the gold to silver ratio widened to about 68.5 from about 67.3, on our calculation, a modest move but one that ran against the pattern of the two metals trading together. Copper was effectively flat, up 0.15 percent to 6.597 dollars a pound.

Agriculture

Coffee was the day’s outlier by a wide margin. Its 5.94 percent gain was more than four times the next largest advance anywhere in the agricultural complex, corn at 1.28 percent, and no other agricultural contract moved as much as two percent in either direction. Cotton added 0.38 percent to 88.69 cents a pound, sugar 0.28 percent to 17.66 cents and wheat 0.21 percent to 700.75 cents a bushel. On the losing side, cocoa fell 1.74 percent to 5,929.00 dollars a tonne and soybeans 1.13 percent to 1,225.50 cents a bushel. We have not confirmed a driver for the coffee move at an approved originator, and the move is reported here as a price fact rather than an explained one.

Rates, currencies and the wider tape

The VIX rose 4.36 percent to 15.79, the largest move outside the commodity complex though still short of coffee, and the level remains low by the standards of the past year. Bitcoin gained 1.77 percent to 78,724.87 dollars. The US dollar index firmed 0.22 percent to 99.019 as the euro eased 0.15 percent to 1.1661 and sterling slipped 0.09 percent to 1.3628. Treasury yields fell across the curve at the long end, with the 30-year down 4 basis points to 5.23 percent and the 10-year down 4 basis points to 4.70 percent, while the two-year was unchanged at 4.24 percent. Long yields falling while the front end held is a bull flattening: the two to thirty year spread narrowed by 4 basis points, from 103 to 99, on our calculation.

Table – Energy, 24 August, ranked by change:

Table – Metals, 24 August, ranked by change:

Table – Agriculture, 24 August, ranked by change:

Table – Rates, currencies, volatility and crypto, intraday 24 August:

Commodity futures are the CNBC most active contract for each benchmark, captured after that contract’s settlement window; the delivery month is shown beside each instrument because vendors roll to the next active month at different times, so a screen quoting a different month will show a different level for the same date. Rates, currencies, volatility and crypto are intraday quotes taken at 22:20 Kuwait time on 24 August, since those instruments trade continuously and have no daily settlement. The Kuwaiti dinar and Egyptian pound rows are official central bank reference rates for 24 August, not market quotes. The Treasury rows are the official daily par yield curve and the changes are our calculation from the 21 and 24 August published rows. Sources: CNBC; United States Department of the Treasury; Central Bank of Kuwait; Central Bank of Egypt.

Why it matters:

The day’s real story is inside the barrel rather than across the board. Crude fell about two percent, which on its own is an ordinary session, but diesel fell more than twice as fast and took roughly seven dollars a barrel out of the distillate crack in a single day. That spread is one important signal in refinery economics rather than a full margin, and a compression of that size, if it persists, would weaken the economics of maximising distillate output before it showed up in the crude price. Coffee’s 5.94 percent jump is the largest single move on the board and stands almost alone; the rest of the agricultural complex was quiet, which is the signature of a contract responding to something specific to itself rather than to a broad commodity bid. The rise in the VIX alongside a firmer dollar and lower long-end yields points to some demand for protection, though gold and Bitcoin were both higher at the capture, so the cross-asset read is a mixed defensive tilt rather than a clean flight to safety.

Outlook:

The distillate crack is the number to watch: whether Monday’s compression extends or reverses will say more about refining margins into the autumn than the headline crude price will. In agriculture the follow-through matters: holding Monday’s coffee gains would suggest the move is being repriced into the market rather than treated as a one-session spike. On rates, the long end fell while the front end held, and any continuation would keep flattening the two to thirty year spread from the roughly 99 basis points where it now sits.

Sources: CNBC for all commodity contract prices, currencies, the dollar index, volatility and crypto, and for the oil market context and the Commonwealth Bank of Australia forecast; United States Department of the Treasury for the official daily par yield curve; Central Bank of Kuwait for the official USD/KWD rate; Central Bank of Egypt for the official USD/EGP rate.

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