Commodity wrap - Oil, gold, natgas, cocoa (25.02.2025)

Oil:

• The United States is imposing new sanctions on Iran aimed at reducing the country's oil exports.
• The U.S. is sanctioning 30 brokers, ship operators, and transport companies involved in trading Iranian oil.
• Donald Trump indicates that he wants to reduce Iran's exports to zero, as was the case during his previous presidency.
• Iran currently produces approximately 3.2 million barrels per day, exporting just under half of it, primarily to China.
• Analysts point out that due to low oil prices, OPEC+ will most likely decide to further delay the timing of a production increase. Current speculation suggests a one-month delay or a postponement until mid-year.
• All OPEC+ cuts currently amount to nearly 6 million barrels per day. It is estimated that OPEC+ could increase production by half of this amount without major investments, but such a level would still have a significant impact on prices.
• Oil prices plummeted sharply on Friday, February 21, following reports of decreasing risk in the Middle East, continued negotiations on ending the war in Ukraine, and weak U.S. service sector data. The U.S. services PMI index fell below 50 points, the lowest level in a year.
• Donald Trump also indicates that his baseline plan includes imposing tariffs on Mexico and Canada at a 25% rate starting March 4. Canadian oil is expected to be subject to a 10% tariff, but these new tariffs remain uncertain.

U.S. crude oil inventories have recently increased, in line with seasonal trends. However, inventory levels remain below the five-year average and last year’s levels. Source: Bloomberg Finance LP, XTB

The crack spread remains high, which could suggest higher oil prices in the near future. However, it is important to remember that the crack spread is somewhat distorted by concerns over access to Canadian oil, which may be subject to new tariffs by the Trump administration as early as March. Source: Bloomberg Finance LP, XTB

Gold:

• Gold remains at high levels, reaching new all-time highs on Monday, February 24.
• ANZ, in a client note, indicates that gold is being driven by uncertainty surrounding Trump's future policies.
• Interestingly, investors are increasingly turning to physical gold. The number of long futures contracts on the market has decreased, but at the same time, there has been a significant increase in the amount of gold held in ETFs.
• The rise in gold prices is currently driven primarily by geopolitical uncertainty, as expectations for interest rate cuts have shifted to the second half of the year. Meanwhile, U.S. 10-year bond yields have fallen sharply.
• The number of long contracts has decreased, yet this has not prevented gold prices from reaching new all-time highs.

The number of long contracts has decreased, yet this has not prevented gold prices from reaching new all-time highs. Source: Bloomberg Finance LP, XTB

In recent days, the amount of gold held by ETFs has increased by over 1 million ounces.
Source: Bloomberg Finance LP, XTB

U.S. bond yields have declined significantly in the second half of February, contributing to the continued rise in gold prices.
Source: Bloomberg Finance LP, XTB

Gold is experiencing its strongest growth momentum in five years, although the pace of growth has recently slightly moderated.
Source: Bloomberg Finance LP, XTB

Natural Gas:

• Natural gas prices have reached around $4.3 per MMBTU due to increased gas consumption in February.
• However, weather forecasts indicate warming and a significant reduction in gas consumption in the coming weeks.
• Although the next storage report may show another 200 Bcf decline, the report for the current week might show a decrease of only 50 Bcf. Storage levels are currently in line with the five-year average.
• Nevertheless, expectations for increased exports from the U.S. in the coming months (with current exports at 15 Bcfd) indicate a reduced ability to replenish storage levels during the summer.
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There has been a significant decline in natural gas demand compared to the strong consumption seen last week. Source: Bloomberg Finance LP, XTB

Gas demand has returned to standard levels. Historical averages indicate that demand is expected to decline significantly in the coming weeks. Production remains at record levels for this time of year. Source: Bloomberg Finance LP, XTB

Storage levels are following the five-year average. The key factor for price trends in April/May will be the pace of inventory replenishment. If replenishment is slower, NATGAS could approach 2022 price levels. Source: Bloomberg Finance LP, XTB

Cocoa:

• Cocoa is experiencing a significant price correction due to concerns about declining chocolate demand and the unwinding of long positions by market speculators.
• Executives from cocoa-processing companies such as Hershey and Mondelez have pointed out that high prices are leading to reduced demand.
• Mondelez's CFO indicates that chocolate prices could rise by as much as 50% if cocoa prices continue to increase, which would naturally reduce consumption.
• Meanwhile, Hershey notes that high cocoa prices are driving the need to reformulate products by replacing cocoa with other ingredients to cut costs.
• Recently, there has also been a slight rebound in cocoa inventories on the New York exchange. However, stocks remain more than 60% lower compared to last year.
• Inventories fell to 1.26 million bags at the end of January but have now risen to 1.42 million bags, marking the highest level in two months.
• Cocoa deliveries to ports in Ivory Coast totaled 1.368 million tons from the beginning of October to the end of last week. During this period, deliveries were up approximately 17% year-over-year, but in December, the increase was about 3%, indicating a slowdown in deliveries compared to previous months.
• Recent rainfall in West African countries has somewhat eased concerns about mid-season crop yields, which begin in April.

In recent weeks, cocoa stocks on exchanges have been rising. However, a similar situation occurred last year, followed by a sharp decline starting at the end of February. Source: Bloomberg Finance LP, XTB

Once again, we observe relatively moderate contango on near-term cocoa futures contracts. In the past, this has been a signal of a potential market bottom, but a fundamental shift in the market cannot be ruled out. In the long term, cocoa remains in strong backwardation. Source: Bloomberg Finance LP, XTB

The number of long contracts in the cocoa market has recently decreased. Source: Bloomberg Finance LP, XTB

Cocoa prices are currently performing the worst in at least five years. However, the five-year average suggests that within the next 10-20 days, the price could reach a potential local bottom. This would be linked to a reassessment of the approaching start of the mid-season harvest. Source: Bloomberg Finance LP, XTB