Oil:
- Brent below $ 70 a barrel, WTI is trading around $ 68 a barrel
- Russia hopes Iran will join the OPEC + deal when the US lifts sanctions (positive news for oil)
- However, there are no immediate prospects for an agreement. The United States wants to wait for the political situation in Iran to clear up after the elections
- Asia oil imports have been declining for 5 consecutive months, which shows the weakness of the short-term fundamental factors
- Higher supply from OPEC + may, however, limit the upward movement, which may ultimately lead to a rebound in imports in the fourth quarter of this year and stabilize prices
- U.S. crude oil inventories have stopped declining and are now around 2019 inventory levels, but still significantly above 2018 levels, gasoline inventories are at their 5-year low, distillate inventories are bouncing back
- Looking at inventories, the market has yet to reach the fundamentals of 2018, even despite strong OPEC interference
Oil imports by Asian countries have been declining for the 5th consecutive month. Source: Reuters
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Prices are starting to behave very much like last year. Asia wants to wait and make bigger purchases at lower prices. Additionally, the strong US dollar does not help oil. The key period for oil prices should be the turn of September and October. Then it will be clear whether the coronavirus will attack with another wave and the demand rebound will collapse. Source: xStation5
Gold:
- Gold once again retreated from resistance at $ 1,830 an ounce in response to stronger dollar after hawkish comments from Fed bankers
- After all, US bond yields remain very low, which should keep prices above $ 1,800 an ounce
- ETFs keep the amount of gold in vaults at stable level, net speculative positions rebound
- Long-term seasonality, however, points to potential declines of gold prices
The price of gold remains in the middle of the consolidation zone between $ 1800-1830 an ounce. Currently gold is trading below 50 SMA and 38.2 Fibonacci retracement. The supply zone is strengthening. In the near term, the US dollar may have the greatest impact on the gold market. Source: xStation5
Coffee:
- Coffee prices deepen sell-off amid news of potential frost in Brazil
- Market expects impact of poor weather to be limited, especially as frost is expected in just a single region
- Correlation between coffee prices and Brazilian real remain high. BRL has been weak recently and gives little reasons for a short-term appreciation
- Seasonal patterns for coffee hint at price stabilization until mid-October
- International Coffee Organization expects price to remain elevated for 2-3 year due to damaged plants in Brazil
- Large reduction in the number of open long positions. Investors also trim bearish bets
- Coffee stockpiles on ICE stopped rising, what may hint at future supply issues in Brazil as it was mostly Brazilian coffee that supplied stockpiles on ICE recently
Coffee stockpiles on ICE stopped increasing. Source: Bloomberg
Large reduction in the number of open long positions may hint that speculation on the impact of frost is over. On the other hand, ICO expects prices to stay elevated for 2-3 years. Source: Bloomberg
Copper:
- Copper prices once again approaches a key upward trendline, that coincides with a 23.65 retracement of the upward impulse
- Back in 2011 a drop below 23.6% retracement was followed by a long-term downward trend
- Massive drop in iron ore prices does not have a big impact on prices of other industrial metals. Nevertheless, steel production is being limited in China and it contributes to drop in iron ore prices
- Outlook for the economic rebound in China is changing, what can be reasoned with a pick-up in new Covid-19 cases around the world
- Copper stockpiles in China remain low
Copper stockpiles in China remain low, just as in other parts of the world. Nevertheless, the situation stabilized in the past few weeks. Source: Blooberg
As one can see on the chart above, the massive plunge in iron ore price does not have a big impact on copper prices. Steel and coal prices remain stable. However, metals used in production of different types of steel, like for example nickel or zinc, may remain under pressure. Source: Bloomberg
Copper price trades near key supports - upward trendline and the 23.6% retracement of the latest upward impulse. Source: xStation5
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