Commodity Wrap - Oil, Copper, Natural Gas, Gold

Oil

• According to a Goldman Sachs, Saudi Arabia budget projects oil price at around $50 for the next three years

• Oil production at four North Sea fields operated by Equinor has been shut after the employer failed to reach an agreement with employees. Strikes will cut Norwegian oil output by around 8%, or 330k barrels per day

• Libya increased oil production to 290k barrels per day from 250k last week. Libyan oil industry is recovering after a truce ended civil war in the country

• Hurricane Delta is expected to make a landfall on US Gulf coast during the night between Thursday and Friday

• 3 main oil exporting ports in Mexico have been closed for 7 days already due to bad weather. Vessel loadings are delayed

WTI (OIL.WTI) continues recovery and approaches $40 a barrel mark. Important resistance - downward trendline - can be found nearby and it could put a break on the ongoing rally. However, hurricane concerns are currently playing a major role in oil trading. Source: xStation5

Copper

• Supply disruptions in mines in Chile could be a major theme for copper in the upcoming days or weeks

• Supervisors at Escondida, world's biggest copper mine, could launch a strike this Thursday in case no agreement with mine owner is reached

• Two worker unions at Candelaria mine rejected final offer from mine owner and vote to go on a strike

• Coronavirus outbreaks in copper mines in Peru are negatively affecting production in the country. Production was 2.5% MoM lower in August

• Copper stockpiles on the global exchanges rise

Latest drop in copper prices (yellow axis, inverted) was triggered by an increase in copper inventories on global exchanges. Source: Bloomberg

Copper prices climbed above the downward trendline but have seen muted trading since. Potential supply issues in Chile and Peru should provide support for prices. On the other hand, rising stockpiles on the global exchanges should be enough to avoid any major disruptions. Source: xStation5

Natural Gas

• Natural gas prices have been very volatile as of late

• 30-day price volatility at the highest level since Q1 2018. Implied volatility highest since at least 2010

• La Nina may cause chilly winter in the northern parts of the United States driving demand for natural gas higher

• Delta hurricane is likely to shut down natural gas production in the US Gulf area

• Tight supply in Europe is also supporting prices as peak demand season is beginning. Gas flows from Russia dropped 33% since the beginning of the year while Norway supply is down 13%

• Nevertheless, European gas storage is near maximum capacity

Natural gas prices have not been that volatile since early-2018. Uncertainty about winter weather as well as impact of approaching hurricane Delta are main drivers behind recent abnormal moves. Source: Bloomberg

Gold

• Gold has been recovering from recent declines over the past week. Price has been supported by rising ETF holdings as well as remarks from central bankers hinting at continued expansive policy

• ETF gold holdings hit record high at 111.049 million troy ounces

• Christine Lagarde said that ECB is ready to cut rates or add stimulus in order to support economic recovery in Europe

• Fed's Bullard said that he think monetary policy is the right place and said that more fiscal stimulus would make forecasts rosier

• FOMC minutes to be released tomorrow. Powell to speak later today

• ECB minutes to be released on Thursday. Lagarde to speak later today

ETF gold holdings continue to climb to fresh all-time highs. While gold prices lagged recently, strong demand from funds shows that the mid-term upward trend has fundamentals. Source: Bloomberg

Gold has reached an important short-term price zone ranging between $1,908 and $1,915. Precious metal failed to break above this resistance last week but bulls are making another try today. Note that this zone is also marked with the upper limit of the Overbalance structure therefore a break above would hint at short-term trend shifting to bullish. Source: xStation5