Commodity Wrap - Oil WTI, Natgas, Gold, Cocoa (06.05.2025)

Oil

• OPEC+ has agreed to another substantial production increase for June, once again by 411,000 barrels per day, mirroring the volume set to be reinstated in May. However, Saudi Arabia is pressuring countries such as Kazakhstan and Iraq to reduce their output to compensate for previous overproduction.
• There is a growing belief in the market that OPEC+ core members are deliberately increasing production in order to force other member states to adhere to compensation agreements for earlier overproduction. If they fail to comply, it's likely that high production restoration levels will continue through July and beyond — aiming to eliminate the group’s current 2.2 million barrels per day of voluntary output cuts by October 2025.
• Nevertheless, OPEC+ argues that these stronger production increases reflect healthy market fundamentals, evidenced by low oil inventories. Crude oil stocks in the U.S. and OECD countries remain below their 5-year averages.
• While OPEC recently revised down its demand forecasts, the organization still expects growth of around 1.3 million barrels per day this year and next. Despite this, OPEC+ continues to raise output, expressing confidence that the market can absorb the extra supply.
• Concerns about a trade war have kept oil prices hovering near 4-year lows. The futures curve remains in short-term backwardation, signaling a still-tight market.
• Meanwhile, speculation is mounting around a potential Shell takeover of BP. If such a deal materializes, Shell would become the third-largest oil company by market capitalization, behind only Saudi Aramco and Exxon, overtaking Chevron. Although Shell’s management claims to be focused on increasing internal value, talks with BP are ongoing.

Recently, WTI long positions saw a modest rebound, yet prices remain under heavy pressure. Source: Bloomberg Finance LP, XTB

U.S. oil inventories remain well below the 5-year average and last year’s levels. However, the market may be near a seasonal inventory peak. Source: Bloomberg Finance LP, XTB

Natural Gas

• Last week, natural gas inventories increased by over 100 bcf, returning close to the 5-year average, and are now just slightly below last year’s levels.
• On the flip side, natural gas prices are rebounding on expectations of higher summer demand, which is fast approaching. Current data already show a notable temperature deviation in the U.S.
• Heating degree days (HDD) are currently well below both last year and the long-term average, while cooling degree days (CDD) are slightly above normal.
• Gas prices have already rebounded 20% since April 24, when they briefly dropped below $3/MMBTU. Notably, a large head-and-shoulders formation may be forming on the charts. If this plays out classically, the right shoulder could form around $4.4/MMBTU.
• At present, the spot price is near $3.6/MMBTU, while the next contract is trading at $3.9/MMBTU.

The table displays HDD and CDD values and deviations from average and last year. Source: EIA

Gas inventories are now back at the 5-year average.

Source: Bloomberg Finance LP, XTB

Temporary oversupply in the market is now the largest since 2023. However, this is expected to decline soon due to increased demand for gas-fired electricity generation.

Source: Bloomberg Finance LP, XTB

Comparative inventories did not justify such a sharp price drop in April. However, price recovery is now also being driven by the steep contango in the futures curve. Source: Bloomberg Finance LP, XTB

Gas prices are currently tracking seasonal trends, closely resembling the 5-year average, which typically points to an upward move by mid-June (around session 110–120 of the year). Source: Bloomberg Finance LP, XTB

U.S. temperatures are expected to remain above average in the coming period. Source: NOAA

Gold:

• Gold continues its strong price rebound this week, climbing back above $3,300 per ounce as investors react to renewed fears of U.S. tariff escalations.
• Last week, a report by the World Gold Council showed continued strong demand from central banks in Q1, albeit slightly lower than in Q4 2024. At the same time, ETF demand surged significantly, reaching its highest quarterly level in three years.
• Tomorrow, the Federal Reserve will announce its decision on interest rates. While Trump is pressuring the Fed to cut rates, the current U.S. economic conditions — characterized by a strong labor market and elevated inflation risks — do not justify easing.
• Recent NFP data was robust, and the ISM services price subindex surged, indicating rising inflationary pressures.

While the physical gold market remains solid, there has been a continued reduction in futures positions. Source: Bloomberg Finance LP, XTB

ETFs slightly sold off gold during the last correction, but the recent rally is likely to reignite investor interest and allocation. Source: Bloomberg Finance LP, XTB

Gold prices have risen around 30% year-to-date — well above last year’s gains and more than triple the average 5-year return. Source: Bloomberg Finance LP, XTB

Cocoa

• Deliveries to ports have declined noticeably. In the week ending May 3, only 30,000 tons of cocoa were delivered to Ivory Coast ports. Since October 1, total deliveries reached 1.53 million tons, compared to 1.37 million in the same period last year — an 11% increase year-over-year.
• Farmers in the Ivory Coast report improved conditions for cocoa trees, with continued flowering, which may extend the mid-crop season that began in April.
• However, processors are concerned about declining bean quality. Processors in the Ivory Coast say that 5–6% of beans in recent deliveries are unfit for processing, compared to only 1% during the main season.
• ICE-monitored inventories continue to rise and have now surpassed 2 million bags, reaching a 7-year high.
• Nigeria, Africa’s third-largest producer, saw exports rise by 24% y/y in March, reaching 27,500 tons. However, its export volume remains significantly lower than that of the Ivory Coast, which delivers more cocoa weekly.
• In the U.S., chocolate demand is declining, according to Hershey, one of the largest producers.
• Q1 sales fell 14% y/y, after a 6% increase in Q4 2024. Hershey warns that tariffs could further raise costs, leading to higher product prices and potentially weaker demand.
• The company is lobbying for cocoa to be excluded from trade tariffs, emphasizing that cocoa cannot be cultivated in the U.S.
• North America is the world’s second-largest cocoa market, after Europe. The U.S. sources most of its cocoa from Ivory Coast and Ghana.
• Currently, a 10% duty is in place, while earlier reciprocal tariffs imposed a 21% rate on the Ivory Coast, which would be the highest among all African nations.

ICE cocoa inventories have already increased significantly but remain extremely low by historical standards.
Notably, past declines in stocks (post-2000) also saw temporary increases after the main season. Source: Bloomberg Finance LP, XTB

However, European cocoa inventories have stopped falling, which could be a key indicator of stabilizing demand. Source: Bloomberg Finance LP, XTB

Cocoa prices are currently declining, in line with long-term seasonal patterns. Historically, the trend suggests continued weakness until mid-year. Source: Bloomberg Finance LP, XTB