Commodity wrap - Oil, Gold, Silver, Coffee, Zinc (24.04)

Oil:

• Oil prices rose after the White House said it would not prolong exemptions from US sanctions on Iranian crude for some countries

• This is a positive factor in the short-term, albeit it could weigh on prices as OPEC and Russia may increase output

• Saudi Arabia tends to rise its output during summer months

• After short-lived rises a corrective move of 9-11$ over the next 2 months is on the cards

Iranian crude exports have risen notably since the beginning of the year. In theory, the White House decision could take as much as 0.6 mbpd off the market. On the other hand, a rise in Iranian exports stemmed mainly from higher purchases from China which could be a bargaining chip in US-China trade talks. Source: Bloomberg

Saudi Arabia tends to boost its crude output during summer months due to increased demand. Source: Bloomberg

Gold/Silver:

• Silver has outperformed gold recently

• Silver may benefit from higher demand for industrial metals

• A relationship between silver and gold remains high

• ETFs have not changed their exposure in commodities in recent weeks

• Net positioning in silver has closed the extreme lows

ETF funds keep a close eye on gold price movements. This relationship is lower for silver. Source: Bloomberg

Net positioning is approaching a neutral level. Source: Bloomberg

Coffee:

• Coffee producers need help in dealing with low prices, they do not break even at current prices

• Producers in Vietnam wait for higher prices storing their grains

• Coffee stocks has approached the cyclical peak, according to ICE

• A sizeable decrease in longs in the coffee market, shorts look still elevated

A notable reduction in longs may suggest that bulls have already thrown in the towel. Source: Bloomberg

Coffee stocks may reach its cyclical peak. We had a similar scenario in 2013 and then coffee prices were falling until 2014. It could signal that coffee prices may hover around their lows for some time. Source: Bloomberg

Technically coffee prices are trying to find a trough at around 90c per pound. A breakout of the bearish channel could result in a move toward 98-100c per pound. Brazilian real appreciation would be a significant factor for coffee. Source: xStation5

Zinc:

• Zinc prices have fallen along with copper

• The zinc market was forecast to back to the balance at the beginning of the year

• Zinc stocks remain low, if the Chinese economic growth revives it could support zinc prices

• CEO of Teck Resources expects upbeat newsflow for zinc from China in the upcoming months, however, he does not see a deficit in the copper market in spite of the fact that copper inventories are below their 25-year average

The zinc market has come back to a surplus in recent months. Source: Bloomberg

Zinc stocks remain high. Source: Bloomberg

Zinc prices are hovering nearby the important support. Chinese demand could be key in the near-term. If we do not see an upward move in the near future, a pullback toward $2700 is possible. Source: xStation5