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Commodity Wrap - Oil, Natural Gas, Coffee, Soybean (16.11.2021)

11:38 16 November 2021

Oil

  • OPEC members - Saudi Arabia, Oman and United Arab Emirates - do not see a need to bring back oil supply at a quicker pace as they expect a drop in oil demand at tthe end of Q4 2021 and at the beginning of 2022

  • Russia joined choir of voices opposing US pressure on boosting oil output

  • Russia also points to a potential oversupply at the beginning of the next year

  • Biden administration explores possible option for lowering gasoline prices, including releasing Strategic Petroleum Reserves. However, impact of such actions is expected to be short-term only

  • US oil inventories increased at a slower pace than hinted by seasonal patterns

  • Gasoline inventories are approaching a seasonal low - incoming end of a maintenance works at US refineries should boost availability of fuels

US inventories grew at a slower pace than hinted by seasonal patterns. Source: Bloomberg

US gasoline inventories remain very low. Source: Bloomberg

Natural Gas

  • Natural gas prices in Asia and Europe resume upward move amid lingering uncertainty over Russian gas supplies

  • Uncertainty over gas flows to Europe via Belarus amid migration crisis on the Poland-Belarus border

  • Putin spoke with Belarus' Lukashenko about natural gas deliveries to Europe via Belarus

  • Temperatures on US east coast and in the US northwest at the end of November are expected to be below-average for the period

  • Demand for US natural gas is 12% higher than last year. However, amount on gas transferred to LNG terminals is declining, what can be reasoned with higher domestic demand

US natural gas prices climbed back above a key $4.80 level. Upward trendline, additionally strengthened by the 100-period moving average, has been defended. Seasonal patterns hint that we are approaching a peak but prices can remain very volatile in the coming months. Market should stabilize by March 2022. Source: xStation5

Heating season in Europe has begun and gas inventories on the Old Continent are falling. Source: Bloomberg

Heating season in the United States may have also begun last week, slightly sooner than expected. Source: EIA

Coffee

  • Coffee prices reached the highest level since 2012

  • Poor outlook on Brazilian and Vietnamese crop suggest slow rebuilding of inventories this week

  • However, price gains on the coffee market are not only related to output issues but also to issues with deliveries

  • Cost of delivery increased several times since last year, what may trigger significant price increases for both coffee traders and end-users

Coffee prices continue to climb higher amid output uncertainty and high costs of deliveries. In turn, availability of coffee may be limited in some parts of the world. It should be noted that net speculative positioning is sitting at extremely high levels. Price has not broken above 61.8% retracement of the 2011-2013 downward wave. Source: xStation5

Soybean

  • Soybean rebounds shortly after a seasonal low as new grains marketing season begins

  • However, it should be remembered that US soybean stockpiles are extremely low

  • Apart from China, higher demand may come from countries like Iraq or Algeria

  • United States want China to comply with Phase One trade deal agreement and buy large quantities of soybean

  • Harvest in the United States is almost over - it was a good season that has allowed for some stockpile rebuilding

  • Price rebound during the first half of November 2020 reached 16%. Similarly to then, a strengthening of the Brazilian real can be spotted that limits competitiveness of Brazilian crop

  • Negative speculative positioning on soybean

  • Soybean price is approaching an important resistance at 1265 cents per bushel. Next resistance in the 1300 cents area is marked with downward trendline and 23.6% retracement

US soybean harvest is almost over - often a signal for looming price rebound. Moreover, pace of harvest has slowed down compared to a very good beginning of the year. Source: Bloomberg

Soybean prices approached the first important resistance in the 1265 cents per bushel area. Strengthening of the BRL may provide more fuel for price rebound, similarly as last year. Source: xStation5

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