Commodity Wrap- Oil, gas, coffee, wheat (01.07.2025)

Oil:

• Oil remains under pressure amid expectations that OPEC+ will decide on another strong restoration of production at 411,000 barrels per day in August. If such a decision were made, it would be the fourth consecutive strong increase in production.
• Voluntary production cuts in 2023 amounted to 2.2 million barrels per day. However, it is worth noting that OPEC+ countries had previously cut production due to reduced demand during the pandemic\
• The ceasefire between Israel and Iran continues, keeping oil prices relatively low
• Donald Trump has indicated that he is willing to consider easing sanctions on Iran if it keeps its word in terms of maintaining peace
• In the United States, demand for fuel remains high. The American Automobile Association (AAA) estimates that during the long Independence Day weekend, as many as 61.6 million Americans will choose to travel by car, which is an increase of 2.2% y/y.
• Investors are waiting for further developments regarding trade agreements with the United States, as the 90-day suspension of mutual tariffs expires on July 9
• The number of drilling rigs continues to decline and is at an almost 4-year low. The number of used fracking rigs is also falling sharply, and the number of unfinished wells is decreasing, which limits the potential for replenishing supply. This may mean that US production peaked locally at the end of last year.

Crude oil inventories are now falling below their five-year low, which shows that the supply situation in the US is not the best. Source: Bloomberg Finance LP, XTB

Inventories of all petroleum products are also falling sharply, and as seasonality shows, this should continue until week 40 of the year. Source: Bloomberg Finance LP, XTB

Comparative inventories indicate that prices should be higher at present. However, the specter of further supply growth from OPEC hangs over the oil market, which could restore inventory growth. Source: Bloomberg Finance LP, XTB

US oil production hit a record high in December last year. Looking at data such as drilling rigs and other fracking activity data, a decline in production from current levels can potentially be expected. Source: Bloomberg Finance LP, XTB

WTI crude oil remains around key support, above USD 65 per barrel, the 61.8 retracement of the entire recent upward wave and the 200-period moving average. Source: xStation5

Natgas:

• Gas prices remain under pressure due to lower than expected heat in the US
• Demand for gas from gas-fired power plants has returned to the 5-year average
• Seasonality indicates that increases should begin in the second half of July. The weather will be key in determining demand
• Despite the opening of new LNG export capacity, exports from the US are not growing rapidly, which has led to continued strong inventory growth in recent weeks
• Production is hovering around historic highs of 107.4 bcfd, up nearly 4% from last year. On the other hand, demand itself was at 74.3 bcfd at the beginning of the week, an increase of almost 7% y/y. Exports amounted to 14.7 bcfd and were up by almost 10% m/m
• Gas inventories remain below last year's levels but are above the 5-year average

Gas prices in the US are again under pressure, as is the case in Europe. However, if Europe starts to have problems replenishing its storage facilities in the near future, this may put pressure on greater imports from the US in late summer/early fall. Source: Bloomberg Finance LP, XTB

Gas demand, together with exports, has approached the level of supply (production + imports). However, at the beginning of July last year, we had a situation where demand temporarily exceeded supply. Source: Bloomberg Finance LP, XTB

Seasonality points to a potential low, although on the other hand, current weather conditions indicate that demand may not exceed 5-year ranges. Source: Bloomberg Finance LP, XTB

The price broke through the support at $3.5/MMBTU and the 200-period moving average. If the price does not rebound before $3.3/MMBTU, this could mean a stronger sell-off before the start of the heating season. Source: xStation5

Coffee:

• Recent rains improve the outlook for harvests and production in future seasons in Brazil
• Recent rains, significantly exceeding historical averages, have minimized concerns about drought during the summer
• The USDA FAS estimates that production in Brazil in the 25/26 season will increase by 0.5% y/y to 65 million bags and will rebound significantly in Asian countries. Vietnam, the world's second largest coffee producer, is expected to see production up 6.9% y/y to 31 million bags
• However, the current harvest in Brazil is progressing more slowly than usual, although we have recently seen an increase in stocks.

Coffee is currently falling below its 1-year average. A strong oversold signal only occurs after a 2-fold deviation from the average. As the deviation from the 5-year average shows, there is still plenty of room for a potential decline (to at least around the average). Source: Bloomberg Finance LP, XTB

Inventories have increased slightly this year, although historically they remain at a low level. As the turn of 2022 and 2023 shows, a stronger decline in inventories is needed to bring about a sharp sell-off. Source: Bloomberg Finance LP, XTB

Since the end of 2024, we have seen a sharp reduction in long positions on coffee. However, short positions remain very low. Their increase could indicate that larger declines are still ahead of us. Source: Bloomberg Finance LP, XTB

The price is currently at an important support level in the form of an upward trend line and at the 50.0 retracement of the upward wave from 2023. Breaking through this level could mean an attempt to fall lower to 240 cents per pound, where the beginning of a strong impulse that started in November 2024 and local price peaks in 2022 and 2023 are located. Source: xStation5

Wheat:

• Recently, we have seen a clear closing of short positions on wheat in the US.
• The winter wheat harvest in the US is worse than usual. By the end of June, 37% of the planned area had been harvested, which is 5% less than average. 
• Wheat quality was rated at 48% last week (the share of wheat in excellent condition), which is a decrease of 1 percentage point from the previous report. The long-term average is 53%.

Recently, we have seen a sharp decline in short positions on wheat. However, we are also seeing a decline in long positions. Until the buying side takes the initiative, a major rebound is unlikely. Source: Bloomberg Finance LP, XTB

Wheat has been consolidating since last summer. It is worth noting that the strong growth periods for wheat last year were at the end of July and the end of August. If the harvest in the US is not very good (although the weather is not bad at the moment), this could mean a potential seasonal rebound. Source: xStation5

Seasonality points to a short-term rebound in the near future, followed by slightly longer gains in early autumn. Source: Bloomberg Finance LP, XTB

Global fundamentals do not encourage betting on a major rebound, given the increase in inventories relative to consumption compared to the previous season. Source: Bloomberg Finance LP, XTB