Commodity Wrap - Oil, Gold, Wheat, Copper (12.09.2023)

Oil

• Prospects for further growth in US oil production are severely limited. The number of drilling rigs has fallen by 140 this year, down 20% since the beginning of this year
• Gasoline inventories in the United States are at the minimum range of the past five years. They are also approx. 5% lower than the 5-year average, showing that demand is still quite high
• According to Goldman Sachs, Saudi Arabia's budget-balancing price is around $85 per barrel. For the UAE, however, it is closer to $50/b.
• For years, Russia's budget-balancing price has been in the $40-50/b range. Currently, through the ongoing war, it is estimated to be as high as $115 per barrel. Of course, with such a high level earlier last year we saw the destruction of demand
• It is worth remembering that Saudi Aramco is planning additional share sales in December, so pressure can be expected to keep oil prices high until December
• The EIA in its forecasts indicates that oil demand will reach its peak before 2030

We are seeing a massive increase in speculative interest in the oil market. Net positioning is already above the 2-year average. Source: Bloomberg Finance LP, XTBThe next important resistance on WTI oil is around $90 per barrel. Source: xStation5

Gold

• After recent declines, gold can't break above $1925 per ounce on a sustained basis
• Gold falls on Tuesday, September 12, to its lowest level since August 28. The nearest important support is around 1910 US per ounce
• Seasonality shows a potential local low on September 21, which could indicate a local low after the Fed decision
• Gold will react to further changes in global interest rates, although it will primarily look to the Fed decision.
• An increase by the ECB could help gold through a rebound on the EURUSD pair. There is also a possible "hawkish" pause in hikes. A similar situation occurred in June on the part of the Fed
• In addition, a potential change in monetary policy in Japan could lead to more weakness in the US dollar. A potential strengthening of the yen could be viewed by the broad market as an influx of capital into safe havens, which could also benefit gold

Despite high uncertainty about the U.S. inflation reading and the Fed decision, net positioning on gold has rebounded recently. Source: Bloomberg Finance LP, XTB

The GOLD price is falling to its lowest level since late August. Key support is around $1910 per ounce. Seasonality points to a local low in the middle of next week. Source: xStation5

Wheat

• Virtually all winter wheat in the US has been harvested. The progress of the US spring wheat harvest is roughly in line with the 5-year average
• The WASDE report should show stable US wheat reserves. Global data should not yet reflect harvest concerns in the southern hemisphere
• Drought prospects could limit harvests and future wheat production in Australia, Canada and Argentina. However, this has limited impact on prices at this point
• One factor causing sizable declines is the glut of Russian wheat on the global market. Once warehouses are emptied, there will be the possibility of a return of the agreement on the export of wheat and other agricultural goods from Ukraine, which could additionally have a negative effect on prices
• Wheat sowing plans in Ukraine are higher than last year, which could mean additional supply next season

Due to the rupture of the agreement on the export of agricultural goods from Ukraine, speculators have noticeably reduced short positions on wheat since the middle of this year. On the other hand, we are currently seeing a large number of short positions building again. Positioning is again below the 2-year average. Source: Bloomberg Finance LP, XTB

Wheat continues its sell-off and falls to the lowest level since May. Interestingly, the RSI is falling to its lowest level since the May and August lows, which could suggest an oversold condition. Current levels are at the same time around the local peaks of 2018 and 2020. A drop below the May low could indicate a willingness to test the 550-565 cents per bushel range. Source: xStation5

Copper

• In China, we are at the moment of the biggest seasonal demand surge for copper, due to the peak of the construction season
• However, copper's further fortunes will depend on further moves by Chinese authorities
• Copper stocks on global exchanges have rebounded slightly, although they are still near extremely low levels. Credit impulse in China fails to rebound
• The copper price has risen sharply in response to a sizable increase in the yuan, but the increases are already being reduced. A return below $8300 will mean a possible drop near support at $8150/tonne
• At the same time, seasonality points to possible increases from September 19, which would coincide with the Fed decision

Positioning on copper has again been close to "zero," which is the result of a sizable reduction in short positions. Nonetheless, positioning does not provide a guideline for direction in the copper market. Source: Bloomberg Finance LP, XTBInventories remain extremely low (inverted axis), but are starting to rebound slightly. Source: Bloomberg Finance LP, XTBCredit impulse suggests several months of consolidation on copper, followed by stronger declines. Source: Bloomberg Finance LP, XTBThe yuan has long shown massive weakness in the Chinese economy. On the other hand, COPPER is holding strong. Key support is located near $8150. A move below this level could mean a real breakout from the triangle formation. On the other hand, seasonality points to possible increases in the second half of September, which could be sustained until mid-November. Source: xStation5