Commodity wrap - Oil, Cocoa, Gold, Wheat

Oil:

• Russia is expected to produce 150 kbpd less of crude oil compared to the agreed reduction level of 230 kbpd

• Russia was to reach the production cut level of 230 kbpd by the end of March

• The country suggests that along with OPEC it could fight about a market share with the US, a move which could result in a decline in prices toward $40

• US refineries utilization has increased recently, a fall in stocks point to further increases ahead

• A strong rise of speculative positioning in WTI and Brent, long are still off their extreme levels while the pace of shorts’ fall suggests a possible contrarian signal

• Shale output is to increase by 80 kbpd in May

Short positions have fallen toward their extremely low levels. Source: Bloomberg

US refineries capacity utilization has decreased since the start of this year. We expect this trend to catch up the levels seen in previous years. Source: Bloomberg

Cocoa:

• Cocoa prices declined substantially after the prices reached the technical obstacle of $2400

• Ghana has lowered its output forecasts to 850k tons from 900k) due to plant disease

• More scrutiny of Ghana’s and Ivory Coast’s cocoa deliveries could limit illegal production in the long-term

• Manufacturing of cocoa increased by 3.3% YoY in Q1

• Farmers from Ivory Coast point to higher crops compared to the previous year

Longs have approached their extremely low levels. Cocoa prices are hovering around the key resistance. Source: Bloomberg

Cocoa prices are retreating from the important resistance. Some pullback could be expected from a technical point of view. Source: xStation5

Gold:

• Solid data from China lifted moods on the global markets and caused demand for safe haven assets to decline

• Good earnings from the US banks

• Implied market probability of interest rate cuts dropped significantly

• Gold needs one of thee factors: significant USD sell-off, another dovish move from Fed or a streak of disappointing macroeconomic data

No additional demand from ETFS hints at no upward pressure on gold prices in the nearby future. Source: Bloomberg

Wheat:

• US delegations in Brazil investigates potential for increasing for the increase of the Brazilian imports

• The US crop quality unchanged against previous week (60%)

• Price declines on the US and French exchanges amid expectations of a rebound in production

• The latest forecasts point to major output recovery in Germany and Russia

• Forecast for Russian output lifted from 80 million tonnes to 83.4 million tonnes (4% increase)

• European crop yield expected to be way above the 5-year average

• Wheat plantings in the US are weaker than expected, similar to the ones from the previous year and below the 5-year average

Outlook for wheat exports deteriorated in the past few months. On the other hand, 50-period moving average for the weekly sales date hints at quite a major rebound, what could improve the outlook for the months to come. Source: Bloomberg