Commodity wrap - Oil, Gold, Natgas, Cocoa (07.01.2025)

Oil:

• Brent crude prices reached their highest level since mid-October 2024 at the start of 2025, buoyed by hopes of a stronger-than-initially-forecasted economic recovery.
• The Washington Post reports that the incoming administration's plans regarding tariffs in the US are less aggressive than signalled during the election campaign.
• The new administration is expected to impose higher tariffs only on products deemed critical to the US economy. This would have a minimal impact on international trade and energy fuel demand.
• Gains in equity markets over the previous two sessions reflect increased investor confidence in the outlook.
• A broad-based weakening of the US dollar is also observed, particularly against the euro.
• Saudi Arabia has opted to raise export prices for Asia by $0.60 per barrel, exceeding expectations of a $0.10 increase.
• Goldman Sachs points to a decline in oil production to 3.25m bpd in Iran. Current output stands at 3.3m bpd, down from a peak of 3.4m bpd in September 2024. GS also indicates a reduction in exports, potentially linked to the new administration taking office in the US.

US crude oil inventories begin the new year at very low levels. Seasonally, inventories are expected to rise over the next 10-20 weeks. However, OPEC+'s recent decision to maintain production unchanged until April suggests a global market deficit. Source: Bloomberg Finance LP, XTB

Comparative inventories remain negative, with stocks relative to the 5-year average near extremely low levels of -40m bbl (inverted axis). Source: Bloomberg Finance LP, XTB

Iranian oil production and exports have marginally decreased in recent months. This could theoretically change following the new administration's inauguration in less than two weeks. Source: Bloomberg Finance LP, XTB

The oil market has re-entered a significant backwardation, which historically has been indicative of overbought conditions. Source: Bloomberg Finance LP, XTB

WTI crude broke through key resistance around $70 per barrel at the end of December 2024 and has gained over 3% in 2025. Key resistance now lies above $75 per barrel, around the 200-day SMA, which was last breached for more than a day in June and August 2024. Source: xStation5

Gold:

• Gold has resumed its upward trajectory since the end of 2024 but remains within a broader consolidation range since the beginning of November 2024.
• Key support levels are marked by the 100-period moving average at $2,600 per ounce.
• Gold is currently breaking above the zone associated with the 25 and 50-day SMAs.
• According to data published by the PBOC, the Chinese central bank has purchased gold for its reserves for the second consecutive month. Reserves have increased from 72.96m ounces to 73.29m ounces.
• The People's Bank of China (PBOC) has been one of the main central bank buyers of gold in recent years.
• Global geopolitical uncertainty should support further upward pressure on gold prices. Conversely, if the new US administration does not implement stringent tariffs, the risk premium in the gold market could significantly diminish.
• The market prices in only a 10% probability of a Fed rate cut in January.

Gold is gaining almost 1% during the session on 7 January. At current prices, the highest closing price since mid-December is possible. Source: xStation5

Natural Gas:

• Natural gas prices experienced a sharp increase in the final days of December due to lower temperatures and increased demand in the US.
• Current gas consumption is above 5-year highs for this period.
• At current consumption rates, the weekly inventory decline could potentially reach as high as 300 bcf.
• High gas consumption is linked to falling temperatures in the US. Forecasts for the next two weeks indicate continued lower temperatures.

Gas consumption is currently the highest in 5 years for this period. Production is falling close to the 5-year average. Source: Bloomberg Finance LP, XTB

Considering current gas consumption and falling production, the inventory decline next week could potentially reach close to 300 bcf. Source: Bloomberg Finance LP, XTB

The price tested the $4/MMBTU level at the end of last year. Despite high consumption, the price is currently undergoing a correction. Seasonality suggests the correction should last around 30-40 sessions. However, the correction may also be linked to the shape of the forward curve. The current difference between the February and April contracts is $0.6. The April contract is trading around $3/MMBTU. Source: Bloomberg Finance LP, XTB

Cocoa:

• Cocoa experienced a sharp correction of over 20% at the end of December, breaching the $10,000 per tonne level.
• Losses have now been halved, and cocoa is trading around $11,300 per tonne.
• Cocoa deliveries to the Ivory Coast ports are still higher than in the previous season but are slightly lower than in previous weeks.
• In the week of December 30 - January 5, 55,500 tonnes of cocoa were delivered to ports in Côte d'Ivoire. Since October 1, deliveries have reached 1.11m tonnes, compared to 870,500 tonnes in the previous season.
• High prices and reduced forward sales of cocoa by major producers are causing exchange inventories to continue to decline.
• The intensification of Harmattan winds, bringing dry and hot weather, could harm cocoa trees before the mid-crop season, which begins in April.
• Market liquidity remains low, and processors are reluctant to take positions. Major producers such as Côte d'Ivoire and Ghana are still fulfilling forward contracts from the previous season.

Cocoa inventories on exchanges are falling. Source: Bloomberg Finance LP, XTB

Cocoa is stabilising after increased volatility at the turn of the year. Fundamentally, the situation is not improving, but low liquidity continues to create significant uncertainty. Source: xStation5