Commodity wrap - Oil, Gold, Natgas, Cocoa (22.04.2025)

Oil:

• Oil prices hold near 2-week highs. WTI crude is around $63 per barrel.
• However, the price saw a decline at the beginning of the week along with a strong sell-off on Wall Street. Stronger declines were contained by a weakening US dollar.
• A weakening US dollar makes commodity prices in other currencies more attractive.
• Oil was also under pressure due to the positive tone of talks between Iran and the US, which could result in the lifting of sanctions on oil exports from that country. On the other hand, sanctions have recently been imposed on Chinese companies importing oil from Iran.
• Net speculative positions have rebounded slightly after previously reaching an extremely oversold level, the lowest since 2010/2011.
• Oil remains in short-term backwardation, which means that a crisis with a huge demand destruction is not forecast at the moment. On the other hand, in the longer term, we are observing the formation of contango, which implies expectations of a significant oversupply, which may be related to the restoration of production by OPEC+.
• We are still observing high product margins in the market, which indicates sustained high demand and may signal a slight detachment of the physical market from the futures market.

Oil is trying to recover yesterday's losses but remains below the $65 per barrel level. We are observing a slight rebound in net positions, but they still remain the lowest in several years. At the same time, the physical fuel market does not show such an extremely negative sentiment, which may indicate a decoupling of the fundamentals of the paper market from the physical one. Source: xStation5

Gold:

• Gold reaches $3500 per ounce and sets new records. This year, gold has gained almost $900 per ounce, representing a return of over 30% since the beginning of the year.
• The increase in gold prices is a result of huge global uncertainty regarding international trade and the dollar.
• Donald Trump is undermining the independence of the Federal Reserve, trying to find a way to fire Jerome Powell. Such a situation could lead to the abandonment of the US dollar as the world's reserve currency.
• Donald Trump would like lower interest rates, but currently, there is a 90% probability indicated for interest rates to remain unchanged during the May meeting which is scheduled in two weeks.
• ETFs continue to purchase physical gold, which is related to high demand for new units. March was another strong month in terms of purchases. Over 200 tonnes of gold have been purchased since the beginning of the year.
• Goldman Sachs has recently increased its gold price forecasts, pointing to $3700 by the end of this year and $4000 by mid-next year. In the event of significant market stress, Goldman Sachs indicates that reaching $4500 per ounce is possible in the meantime.
• As HSBC points out, the strong gold price increases from 45 years ago, triggered by the Iranian crisis and oil, were neutralized fairly quickly, but currently, gold price increases are motivated by trade uncertainty and uncertainty regarding the US status.
• In the first quarter of this year, China purchased 95 tonnes of gold.

March was another strong month of demand growth from ETFs. In February, funds bought 100 tonnes of gold, while in March it was 92 tonnes. Since the beginning of the year, 226 tonnes of gold have been purchased. Current purchases are beginning to resemble the situation from 2020, when, in the face of uncertainty, investors also began investing not only in physical gold but also through ETF units. Source: World Gold Council

Gold has gained $500 per ounce since April 7, when a local low was established in the previous correction. Gains in gold are motivated by uncertainty and a significant weakening of the US dollar, which may increase gold purchases in Asian countries. Source: xStation5

Natgas:

• Gas prices also came under pressure during Monday's sell-off. Gas prices are closing the gap that arose after the last rollover. The forward curve is in contango, which means that spot prices are lower than forward prices until January next year.
• Winter is already over, although usually during this period we still observed significant gas consumption for heating purposes.
• BloombergNEF forecasts that gas inventories will be lower in the summer period by as much as 10% compared to the 5-year average, which may indicate high temperatures and high exports with a limited prospect of further production growth.
• Gas production on Monday amounted to 106.8 bcfd (+7% y/y), while demand amounted to only 65.9 bcfd (-7.3% y/y). LNG exports amounted to 15 bcfd (-5.6% w/w).
• However, the data show sustained high demand from power plants. Demand in the week ending April 12 was 6.4% higher y/y, while in the last 52 weeks it was 3.7% higher compared to the same period earlier.

The heating season in the US is still ongoing, although gas consumption for heating purposes is already minimal. Temperatures in the US remain above the average for this period. Source: NOAA

Gas inventories fell more sharply during the heating season, but at the same time began to rebound faster. Currently, gas inventories have returned to the vicinity of the 5-year average. Source: EIA

Gas is testing the area of the 200-session average. The range of the Head and Shoulders formation indicates a possible test of the $3/MMBTU level. Source: xStation5

Cocoa:

• Further positive information regarding demand is emerging. Data from the American Chocolate Manufacturers Association showed a decrease in cocoa processing of 2.5% y/y to 110.3 thousand tonnes. A decrease of 5% y/y was expected.
• Earlier data from Europe and Asia also turned out to be better than expected, showing a decrease of 3.7% y/y and 3.4% y/y respectively, compared to an expected decrease of 5% y/y.
• Theoretically, with better demand data for Q1 2025, it can be expected that the anticipated surplus will be smaller than the forecast of 142 thousand tonnes.
• According to Rabobank, cocoa production from the mid-crop season may be disappointing, which is related to delayed rains. Producer surveys conducted in Ghana and Ivory Coast were disappointing.
• Bloomberg reporters who visited West African countries last month indicated that cocoa farms are far from stabilizing. Dry conditions and problems with tree diseases are still visible.

The cocoa prices continue rebound reaching almost 9000 USD per tonne during yesterday’s session. Source: xStation5