Commodity Wrap: Oil, Corn, Silver, Coffee

Oil

- Capital expenditures of Saudi Aramco, the world's biggest oil company, dropped 12% YoY in H1 2019 hinting at potential tightening of supplies in the months to come
- According to Bloomberg report, Saudi Arabia plans to limit oil exports to below 7 million barrels per day in order to stabilize market
- In spite of solid demand, Saudi Arabia also plans to limit output in order to buoy prices
- Another shipment of the Russian diluent naphtha reached Venezuela
- Alexander Novak, Energy Minister of Russia, said his country will act in the interest of oil market along with other OPEC+ producers

WTI (OIL.WTI) made a come back over the past few days and is trading around 8% higher against last week’s low. Note that 50- and 200-session moving average were largely overlooked by the market as of late therefore in case an upward move is continued traders may want to focus on a downward sloping trendline. Source: xStation5

Corn

- WASDE report triggered declines on grains market as it showed much better situation than expected
- Corn ending stocks in 2019/20 season seen at 2.181 billion bushels (expected: 1.57 billion)
- Acreage decreased against July’s estimates but yields per acre increased causing total production forecast to increase to 13.9 billion bushels
- Corn price declined over 5% in the aftermath of the report's release marking the biggest daily drop since 2013
- Report showed lower US corn exports due to competitiveness of grain from Brazil, Argentine and Ukraine
- Price broke below the support zone ranging above the 385 handle and is back within the range of the previous consolidation

Snapshot of August’s WASDE report for corn. Source: Bloomberg

Huge downward move triggered by August’s WASDE report brought prices back below the 385 handle. The grain is back within the consolidation range that limited moves from July 2018 to May 2019. In case price fails to break back above the aforementioned hurdle, one cannot rule out the possibility of price declining towards the lower limit of the trading range. Source: xStation5

Silver

- Precious metals continue to rally amid global recession concerns
- Flight-to-safety causes bond yields to decline and, in turn, makes precious metals more attractive
- Gains on the silver market outpaced the ones on the gold market and resulted in gold/silver price ratio steering away from the 90 handle
- Silver trades at the highest level since January 2018

Gold/silver price ratio (green line on the chart above) significantly declined over the past month and once again turned lower at the beginning of this week. Source: Bloomberg

Silver broke above the key price zone ($17.25-17.35) today and is trading at the highest level since January 2018. In case an upward move is continued, resistance may surface in the vicinity of $17.70 handle, where local highs from June 2017 and January 2018 can be found. However, a pullback towards the earlier mentioned zone occurred in the aftermath of the US CPI release. Source: xStation5

Coffee

- Surprising results of Argentine primary elections caused rout among EM currencies, including Brazilian real
- Coffee price declined on Monday being pressured by weaker BRL
- International Coffee Organization (ICO) raised 2018/19 coffee production and consumption forecasts, forecasted surplus increased further
- Large Brazilian crops are among the reasons behind the latest price declines
- Lower prices attracted orders for Brazilian coffee and caused country to break green coffee exports record for July. Exports in the previous month jumped 33% YoY and reached 2.83 million bags

Brazilian exports surged in July as customers wanted to take advantage of lower prices. Exports increase 33% YoY last month and marked fresh record for July. Source: Bloomberg

Coffee price jumped at the end of the previous week but was unable to break above the mix of 200-session moving average (purple line) and 50% Fibo level. Price plummeted this week being pressured by weaker Brazilian real and the commodity is trading back near the support zone ranging 94.50-95.40. Source: xStation5