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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Commodity wrap - Oil, Natural Gas, Corn

12:00 21 November 2018

Oil:

  • US inventories hover well above their seasonal pattern exerting additional downward pressure on prices

  • WTI prices move to the lowest since October 2017 on growing concerns over a faltering demand and still robust output

  • While Saudi Arabia has agreed to cut its production by 500 kbpd in December its November’s output has reportedly surged to a record near 11 mbpd in response to stronger than usual demand from clients preparing for a disruption in Iranian supplies

  • US shale boom continues unfolding, overall liquids productions has soared so far this year implying the US will continue cutting back on oil imports

  • The latest plunge in prices obviously has pushed the short-end of the curve substantially lower but it has had a limited impact on the long-end, it may imply that market participants expect OPEC to curb its output

US inventories remain far above their seasons pattern but they should begin shrinking to some extent in the weeks to come. Source: Bloomberg, XTB research

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The shale boom in the US has driven liquids production much higher so far this year. Note that American net petroleum imports are forecast to fall in December 2019 to 320 kbpd, the lowest since 1949. Source: Bloomberg, XTB research

The WTI forward curve has flattened in recent days suggesting market participants could expect the OPEC will decide to slash production to lift prices. Source: Bloomberg

Brent prices have plunged notably in recent weeks reaching the support in form of $62 per barrel. This level could provide some relief to buyers ahead of the OPEC meeting in December 6-7. Source: xStation5

Natural Gas:

  • According to the EIA US natural gas inventories remain clearly below their 5-year average exerting upward pressure on prices

  • Hectic price movements has driven up futures volume on the NYMEX to the highest this year

  • Between 26 and 30 November temperature in key parts of the United States is forecast to be well below their normal values, another possible reasons to stay bullish on natural gas in the near-term

  • November month-to-date gas production in the US, in general, has been lower compared to the last month as higher output in the Gulf region and Northeast has been more than offset by declines in the regions such as Permian, Rockies and San Juan

  • Gazprom expects further growth in Chinese gas demand, and it plans to boost its global market share via “optimal combination” of pipeline gas and LNG supplies

Lower temperature in the east of the United States could keep elevated natural gas prices. Source: Bloomberg, XTB Research

Natural gas inventories in the US remain below the 5-year average implying demand still outpaces supply. Source: EIA, XTB Research

November month-to-date gas production in the US, in general, has been lower compared to the last month. Source: Bloomberg

Natural gas prices (NATGAS) test their important resistance nearby $4.80 per MMBtu. Source: xStation5

Corn:

  • The latest WASDE report resulted in a cut of estimated US corn production by 152 million bushels to 14626 million bushels due to expected lower yield per harvested acre

  • The WASDE release showed a reduced amount of estimated US corn exports (-25 million bushels) on the back of a rising share of Ukrainian grain

  • Ukraine’s agriculture minister sees the country’s 2018 corn output reaching a record 1.37 billion buhels

  • US corn exports in the currency marketing year has been well above the levels seen in previous years unlike exports of soybean and wheat

The production/consumption spread seems to give some hopes for bulls. Even though its relationship with corn prices have tended to be rather loose, a bit higher prices could be expected based on the level of estimated US ending stocks. Source: Bloomberg, XTB Research

US corn exports have been buoyant so far this year unlike soybean and wheat exports. Source: Bloomberg, XTB Research

The weekly chart implies that corn prices could be poised to head higher in the nearest future. A possible pullback could be used to enter a long with a relatively tight stop loss and decent room for profits ($405 per 100 bushels). Source: xStation5

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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