Commodity wrap - Oil, Natgas, Cocoa, Coffee (19.08.2025)

Oil

• Crude oil prices remain low, despite an attempted rebound during Monday's session amid speculation that the situation in Ukraine will not be resolved quickly.

• Media outlets have delivered a positive verdict on yesterday's Ukrainian summit in Washington. Some suggest the last two weeks have brought more progress toward peace than the previous three years combined. The price is declining today

• A peaceful resolution could lead to a deeper decline in WTI crude prices to the $55-$60 a barrel range, given the possibility of sanctions on Russian oil being lifted.

• Conversely, the current status quo, with no additional sanctions or tariffs on Russia, is keeping prices at low levels. If stricter measures were to be imposed on Russia, the country could face challenges selling its oil, prompting nations like China, India, and Turkey to seek alternative supply regions, which would drive up global prices.

• The fundamentals of the oil market remain unchanged. We continue to experience a clear supply glut, which is expected to persist at least until the end of this year. Crude oil inventories in the US are rebounding and putting downward pressure on prices.

US crude inventories are above five-year low levels and have essentially caught up with last year's level. Seasonality points to a drop in inventories by the 38th-39th week of the year. Source: Bloomberg Finance LP, XTB

Comparative inventories fully justify recent price changes. The key will be the dynamics of the seasonal inventory rebound. If it is faster than normal, oil could reach around $60 a barrel or lower. Source: Bloomberg Finance LP, XTB

Five- and ten-year seasonality indicates a sideways trend in the near term, but a rally in the not-so-distant future. However, the price peak was usually noted around the 200th session of the year. Source: Bloomberg Finance LP, XTB

WTI crude oil prices are testing the vicinity of $62 a barrel. Yesterday, amid uncertainty, prices ultimately rebounded, but the outcome of the Washington meeting is now being received positively. Moreover, Russia is not currently facing the threat of imminent further restrictions on oil exports, which is also putting pressure on prices. Source: xStation5

Natural Gas

• The price of US natural gas remains above the $2.8/MMBTU level despite a clear change in weather forecasts, which indicates a distinct cooling trend at the end of August.

• Recent US data shows elevated gas consumption, which is being offset by record production, leading to further increases in gas inventories.

• Current gas inventories are already well above the 3000 bcf level, and forecasts indicate a likely exceeding of 3700 bcf by the end of the restocking season. Comparative inventories suggest that the decline in gas prices is justified.

• At this point, only a drastic drop in production or a rebound in exports could lead to a lower inventory increase, given the weather outlook, which should bring a decline in gas consumption in the coming weeks.

Gas inventories are well above the five-year average, and the distance to the five-year maximum is narrowing. Source: Bloomberg Finance LP, XTB

Comparative inventories are clearly increasing (inverted axis), which justifies the recent price drops. It is worth noting that in both 2023 and 2024, we observed a decrease in comparative inventories during the summer, which led to price increases. Source: Bloomberg Finance LP, XTB

Gas demand remains at an elevated level, but we are also seeing record production, approaching the 110 bcfd level. Seasonality suggests that we should experience a decline in demand in the coming weeks, which is also indicated by the change in weather. Source: Bloomberg Finance LP, XTB

The current price is now almost one standard deviation from the one-year average. Only two deviations gave a clear signal of undervaluation. The upcoming contract rollover should bring the price to around $3/MMBTU. Due to the change in weather, there may be downward pressure after the rollover. Source: Bloomberg Finance LP, XTB

Weather prospects have changed significantly, and it is expected to be colder at the end of August across most of the United States. Source: NOAA

Coffee

• Coffee prices are experiencing a very strong increase in August, rising from around 290 cents per pound to almost 340 cents per pound.

• One of the main risk factors affecting coffee prices is the 50% tariff introduced on Brazil by the United States, which could curb supplies from the country. Brazil was the main supplier of coffee to the US. Tariffs mean that traders will have to seek coffee from other regions, which could drive up the New York benchmark, even with a large amount of coffee available from Brazil.

• Brazil's Minister of Agriculture has indicated that there is a chance for coffee to be excluded from the 50% tariffs. Such a move could help limit the recent price rebound in the markets.

• Weather in the Minas Gerais region of Brazil (key for Arabica) remains quite poor. In early August, rainfall was 31% below normal levels. Additionally, there was a risk of frost in some areas. At the same time, weather forecasts for the Espirito Santo region remain good, which is expected to lead to a significant rebound in Robusta harvests.

• According to Somar Meteorologia data, Minas Gerais experienced no rainfall in the week ending August 16. Although the harvest is almost complete in Brazil, the lack of rainfall affects the condition of the crops for the next season.

• Coffee exports from Brazil were already quite limited before the tariffs were imposed. From January to July, Brazil exported 22.2 million bags of coffee, a 21% year-on-year decrease. The drop in coffee exports could be due to two factors: a lack of available stocks or potential demand destruction (although prices have also fallen significantly from the record highs in February).

• Long-term temperature projections indicate that many areas may become unsuitable for coffee production over the next 25 years. This could mean that the long-term trend for coffee will remain clearly bullish. At the same time, we have not observed the same demand destruction in the coffee market as in cocoa, even with record prices. On the other hand, some forecasts indicate that demand may slightly decrease in 2025.

Coffee inventories are currently falling to a more than one-year low. Source: Bloomberg Finance LP, XTB

Seasonality in the coffee market partially justifies the recent gains, although it is clear that in the near term, seasonality indicates price consolidation until about the 220th session of the year. Source: Bloomberg Finance LP, XTB

Cocoa

• West African producers expect a 10% drop in production in the 25/26 season, following a slight rebound in the current 24/25 season. Earlier, a slight increase was expected, but rather dry weather limited production prospects. An additional factor is the lack of new plantings in recent years to replace the old trees, which were planted 40-50 years ago and are highly susceptible to disease.

• Production in Côte d'Ivoire is expected to fall to 1.6 million tonnes from a previous target of 1.8 million tonnes. In Ghana, production is expected to remain at level of 600,000 tonnes.

• The bank JP Morgan holds a different view on cocoa supply, indicating a high probability of a production rebound in the 25/26 season. According to JPM, the weather is not as bad as in previous years, which brought a massive drop in production, and new supply from Ecuador is expected to come into play.

• JP Morgan suggests that prices will remain around $6000 per tonne. The futures curve also points to this scenario.

• It is worth noting that recent processing data for Q2 showed significant year-on-year and quarter-on-quarter declines, which shows that prices are too high. The price of finished products is causing a drop in consumption in most markets. Demand in Q2 fell by over 7% in Europe, almost 3% in North America, and 16% in Asia.

• JP Morgan does not foresee a significant revival in demand in the second half of the year until there is a significant improvement in supply and available stocks.

• JP Morgan points out that it sees a chance for increased rainfall in the near term, which will improve the prospects for harvests at the start of the 25/26 season, which begins in October.

• It is important to note, however, that cocoa prices are likely to remain high by historical standards, which may be related to a general increase in global temperatures and reduced rainfall in key production regions.

• The latest weather forecasts indicate the appearance of rainfall in Côte d'Ivoire, which traders believe could lead to a reduction in positions on futures contracts.

Cocoa inventories are currently falling, but this is related to seasonality. Inventories are currently declining at a similar pace to the five-year average. Source: Bloomberg Finance LP

The expiring September futures contract is falling clearly below the current cocoa price. In the past, this exerted short-term downward pressure on prices, but a rebound usually followed. Source: Bloomberg Finance LP, XTB

The September contract is currently trading clearly lower than the December contract. Just a month ago, we observed a clear backwardation between the two closest contracts. Source: Bloomberg FInance LP

The price of the cocoa futures contract in London has almost caught up with the price of the futures contract in New York. In the past, stronger gains in London had a positive effect on prices in New York, although in recent months we have observed rather the opposite correlation. Source: Bloomberg Finance LP, XTB

Five-year and long-term seasonality, excluding the extreme price changes in 2023 and 2024, indicates that we should currently be at a local trough. On the other hand, it is worth noting that prices in 2024 behaved somewhat differently compared to the average. As can be seen, apart from the current potential seasonal rebound, the next moment for a local trough will be around the 220th session of the year. Source: Bloomberg Finance LP, XTB