Commodity Wrap - Oil, Coffee, Corn, AUDUSD & Metals

In this week’s commodity wrap we present you 4 markets that look interesting or/and have posted some major price moves: Oil, Coffee, Corn, AUDUSD & Metals

Oil:

• Oil prices have been falling for the third straight week amid concerns over global economic slowdown

• Saudi Arabia and Russia increased production significantly to tackle deficit on the market

• Simultaneously, Saudi Arabia warns against inventories rising too quickly and announces potential intervention in the future

• Iranian authorities claim that other oil producers will not be able to provide 0.5-1 mb/day of additional output to keep production unchanged after sanctions take full effect

• US crude oil inventories increase rapidly, gasoline stocks at their highest levels in years suggesting a lacklustre demand

• Amount of short positions of oil continue to rise hinting that declines may not be over just yet

Oil stockpiles in the US climbed above the 5-year average. Source: Bloomberg, XTB Research

The US gasoline inventories are at their highest level in almost a decade and significantly above the 5-year average. Source: Bloomberg, XTB Research

Taking a look at the past WTI performance one can see that declines could be extended further. Source: Bloomberg, XTB Research

Net speculative position on oil is at the lowest level since the end of 2017, short positions began to rebound. Source: Bloomberg

Coffee:

• Coffee price rose along with the Brazilian real due to pleasant elections outcome

• BRL was strongly oversold on the back of elections uncertainty, high chance that currency will recover

• Coffee fundamentals remain weak but the latest sell-off was in big part speculation-motivated

• Net positioning on coffee jumped significantly

There was a strong correlation between coffee prices and BRL in the past couple of months. Source: Bloomberg

Coffee inventories on ICE exchange are relatively high and significantly above the 5-year average. On the other hand, stockpiles are much smaller than in 2017 or 2012 ( end of the 2011-2013 downward impulse). Source: Bloomberg

Investors are covering their short positions. Simultaneously, we do not see a rise in the amount of long position what may hint that the latest correction is to deepen in the short term. However, a moderate rebound may be looming in the medium term. Source: Bloomberg

Corn:

• Corn still looks promising from the fundamental point of view, especially when it comes to inventories, stocks-to-use and deficit

• Situation completely opposite to the one of soybean, where significant build in the inventories is expected

• From the technical point of view a retest of the 350 cents level may be looming - strong downward impulse and false break above the downward trendline

• Potential rebound towards the 400 cent handle in the medium term

Fundamentals suggest that corn may rebound in medium and long term. Source: Bloomberg, XTB Research

Corn keeps trading in a downtrend. Source: xStation5

AUDUSD and industrial metals:

• Prices of industrial metals (aluminum, nickel, copper and zinc) dropped significantly since the mid-year on the back of rising trade tensions

• Iron ore prices benefit from China boosting construction and infrastructure expenditures

• Rising iron ore prices should support the Australian dollar

• Lack of further depreciation of the Chinese yuan could also be a positive signal for the Australian dollar

Industrial metals prices fell amid Trade War. However, stimulating measures undertaken by China boosted iron ore prices what may lead to AUD appreciation. Source: Bloomberg