Commodity Wrap - Oil, Natural Gas, Corn, Cocoa

In this week’s commodity wrap we present you 4 markets that look interesting or/and have posted some major price moves: Oil, Natural Gas, Corn, Cocoa.

Oil:

  • Saudi Arabia sees a 1.2 mb production cut agreed on by OPEC+ as enough to stabilize the market

  • Simultaneously, Saudis are disappointed with the pace of production cuts in Russia

  • The US is mulling not extending waivers on purchases of Iranian oil once the initial 6-month exemption ends

  • Chinese crude oil imports rose 10.1% YoY in 2018

  • Forecasts concerning Norwegian oil output in the next couple of years deteriorated recently

Imports of Iranian oil may fall further in case the United States decide not to extend waivers. Source: Bloomberg

Shrinking supply may allow oil prices to add to previous gains. Source: xStation5

Natural Gas:

  • Declines in natural gas storage expected to be smaller than 5-year average

  • Initial estimates hint that cold temperatures may return in February

  • Short- and medium-term weather forecasts suggest that average temperature may be lower than in the previous years

  • Price may continue upward move towards 4 USD handle but it is unlikely that new local highs will be achieved due to booming production

  • Futures curve suggest further downside in the months to come

Futures curve hints that natural gas prices may be subject to the downward pressure in the months to come. Source: Bloomberg

Changes in gas storage hinted at price declines as of late. Currently, expectations do not point at major declines in storage as well, therefore its seems unlikely that we will observe any major upward move. Source: Bloomberg

NATGAS prices rebounded. The price may continue an upward movement in case February indeed turns to be colder than in previous years. However, major upward price movement is unlikely to occur due to robust production. Source: xStation5

Corn:

  • Strong resistance level spotted in the vicinity of 390 cents handle, downward sloping trendline runs near 400 cents mark

  • Important support level can be found near the 50% Fibo level of the latest major upward impulse, key support level at 350 cents per bushel (61.8% Fibo level and ascending trendline)

  • Amount of open positions on corn is increasing, speculators more positive towards commodity

  • Price should moderately move higher according to seasonal patterns

Open interest on corn is increasing what bodes well for the future. Source: Bloomberg

Seasonality hints a rebound lasting until late-spring. Source: Bloomberg

Price pulls back from the vicinity of 390 cents handle but medium-term outlook for corn remains positive. Source: xStation5

Cocoa:

  • 2018 was the best year ever for cocoa prices

  • European cocoa processing increase by 1.6% YoY in the fourth quarter of 2018

  • Cocoa processing in Asia declined but solid advance was spotted in Malaysia (+22.5% YoY)

  • Lack of rains should support prices over the short term

  • Net speculative positioning hints at potential further price increases

Speculators remain positive about cocoa suggesting that price increases are about to come. Source: Bloomberg

Cocoa price pulled back significantly at the beginning of this week. Nevertheless, the drop should be halted before price visits 2100 USD area. Source: xStation5

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