Commodity Wrap - Oil, Natural Gas, Gold, Cocoa (24.08.2023)

Oil

• Concerns related to economic growth in China are causing a retreat in crude oil prices. China is said to account for over 50% of demand growth this year

• Worries have emerged regarding potential production increases in Iran and Venezuela. These countries are not participating in the OPEC+ production reduction program

• The Biden administration is expected to take actions aimed at lifting restrictions on Venezuelan oil imports.

• Last year, Chevron returned to Venezuela to carry out projects with PDVSA. However, profits from the joint project are intended to repay the debt that Venezuela owes to Chevron

• It is anticipated that Saudi Arabia will decide to extend the voluntary production cut of 1 million barrels per day into October as well. Previously, it was expected that Saudi Arabia would gradually phase out the additional cut from October

• This decision is thought to be linked to the growth in production in the Kurdish part of Iraq, which could impact market deficit

• IEA expects the deficit throughout the second half of the year to average around 1.7 million barrels per day

• Standard Chartered points out that in August, the deficit amounts to as much as 2.81 million barrels per day, but it is projected to decrease to 2.43 million barrels per day in September and further down to 2 million barrels per day in the following months. The bank anticipates global inventory to decrease by 310 million barrels by the end of this year and to drop by 94 million barrels in the first quarter of next year (equivalent to deficit of around 1 million barrels per day)

• Standard Chartered forecasts $93 per barrel for Brent crude in the fourth quarter of this year

A key near-term resistance for OIL can be found in the $81 per barrel area, where long-term moving averages intersect. A long-term resistance can be found in the $88 per barrel area. Source: xStation5

Natural Gas

• A preliminary agreement was reached with workers in Australian gas sector. Gas prices in Europe and US are pulling back in response

• Europe continues its collective gas purchases within the European Union, ensuring long-term supplies at least until 2025. So far, these purchases have proven successful, allowing for swift filling of reserves before the upcoming winter season without relying on gas supplies from Russia. Currently, European storage facilities are at 91% capacity

• Gas drilling rigs continue to decline. Last week's data showed a decrease of 6 rigs to a level of 117, the lowest in about 1.5 years. This could indicate that winter production might fall below 100 billion cubic feet per day

• Gas inventories in the US increased by 35 billion cubic feet according to last week's data, slightly above expectations. Inventories remain significantly higher than levels from the previous year and above the five-year average. With current inventories exceeding 3000 bcf, concerns about gas availability during the winter season are unlikely

• Technically, gas is entering a period of consolidation, which typically occurs in early autumn

NATGAS broke below the bullish channel in mid-August and is currently testing an important support in the $2.45 area. Should we see a break below, the next major support to watch can be found in the $2.31 area, where 61.8% retracement of the recent upward impulse can be found. Source: xStation5

Gold

• Gold at the end of the month remains above $1900 USD per ounce, which could allow for minimizing losses in the coming month.

• When it comes to TNOTE, a potential double bottom formation has emerged. If this pattern was to materialize, it should provide support for a rebound in gold and other precious metals prices

• At the end of September, the US Federal Reserve (Fed) will make a decision regarding interest rates. The first significant indications about the upcoming decision could be obtained during the Jackson Hole Symposium, which begins today (August 24, 2023)

• An increasing number of banks and financial institutions expect the Fed to keep interest rates unchanged at the upcoming meeting and to maintain them at this level at least until the middle of next year

GOLD continues to drop this month but buyers managed to defend the $1,900 per ounce area. It should be noted that pullbacks following two previous attempts at breaking above $2,000 mark. Source: xStation5

Cocoa

• According to ICE data, cocoa stockpiles have been dropping for 12 weeks in a row. Inventories are around 15% lower than a year ago what is related to lower supply and higher demand from Europe, Asia and North America

• Cocoa sales in Ivory Cost in 2023/24 season are 13.3% YoY lower amid expectations of a lower output

• The regulator is also limiting the sale of cocoa contracts in Ghana due to uncertainty in production for the upcoming main season, starting in October

• Cocoa production for the 22/23 season in Ghana was 25% lower than initially expected

• Marex Financial anticipates a cocoa deficit of around 280,000 tons, leading to the lowest cocoa stock-to-consumption ratio since 1985, at 30%

• Gepex, an export group comprising the world's 6 largest cocoa processors, indicates that processing in Q2 2023 increased by 3% to 161,400 tons

• However, cocoa prices have experienced a significant setback this month, previously reaching their highest levels in 12 years. The high cocoa prices have raised concerns about the demand for chocolate products, the prices of which have risen sharply in the past 2 years of high inflation

Should COCOA finish this month's trading near 3 350 USD per tonne, a bearish engulfing pattern would surface on the monthly chart. On the other hand, should bulls manage to keep the price above the aforementioned level, another attack on the 3 500 - 3 600 resistance zone can be made. Source: xStation5