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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, Silver, Wheat (26.10.2021)

10:50 26 October 2021

Oil

  • WTI reached $85 per barrel earlier this week for the first time since late-2014

  • Goldman Sachs expects oil demand to rise to above 100 million barrels per day and shift from natural gas to oil to contribute at least 1 million barrels in additional daily demand

  • Saudi Aramco warned that global spare supplies of oil are falling quickly and companies need to boost investment into new projects

  • Impact of a coup in Sudan on total OPEC+ oil output is expected to be limited. Sudan is a member of broad OPEC+ group

  • Russian Deputy Prime Minister Novak said that he wants OPEC+ to stick with its current policy of increasing daily output by 400 thousand barrels per month

  • Saudi Arabia said that OPEC+ needs to be cautious when increasing supply not to flood the world with oil while risk of economic slowdown remains

  • Oil stockpiles at Cushing, Oklahoma - US largest oil storage hub - dropped to the lowest level since late-October 2018

Oil stockpiles remained flat last week and are sitting near a 5-year low for the current period. Saudi Aramco warns that lack of new investments projects in previous years has led to a very tight supply situation with additional capacity being very limited. Source: Bloomberg

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WTI (OIL.WTI) is pulling back from a 7-year high reached earlier this week near $85.00. Note that local market geometries have been respected by price throughout the ongoing 2-month upward move. Having said that, key near-term support to watch can be found at around $82.25. A break below this area would make short-term technical outlook more bearish. Source: xStation5

Natural Gas

  • Natural gas prices resumed upward move after a brief correction. NATGAS jumped more than 20% over the past week and climbed back above the 6.00 mark

  • According to data from TSO, net flows of Russian gas to Europe through Ukraine and Poland dropped to the lowest level since January 2020

  • Another factor that adds to tightness of European gas supply is situation in Norway, where maintenances and technical problems lowered output at some gas fields

  • Wintershall, the largest natural gas producer in Germany, expects price to remain high throughout the winter session

  • According to Bloomberg, it is now more profitable for the United States to export natural gas to Asia than Europe, what makes situation on the Old Continent even more troubling

  • Below-average temperatures are expected in the United Kingdom and Western Europe in the coming days, what may lead to an increase in demand for natural gas

Flows of Russian gas to Europe through Ukraine and Poland dropped to the lowest level since early-2020. Combined with outages on Norway gas fields, the situation adds to an already tight supply. Source: Bloomberg

NATGAS started to regain ground after an ABC correction. Supply situation is tight and is expected to remain so this winter. While a pullback can be spotted at press time, risk of further price gain remains high. Should decline deepen, reaction to the 5.57-5.65 support zone will be key. Source: xStation5

Silver

  • Silver has been outperforming other precious metals recently, climbing to the highest level since early-September at the end of previous week. Gold also gained while platinum and palladium lagged

  • The move was accompanied by weakening US dollar and with this week's small recovery in of the USD, gold and silver gave back part of the gains

  • ETFs were net sellers of gold so far this week while palladium holdings increased. Silver and platinum holdings were little changed

  • Precious metals prices were supported after US Treasury Secretary Yellen said that elevated inflation may last into 2022. Fed Chair Powell also pointed at possibility of high inflation remaining for longer

  • European Central Bank is expected to stay on hold this Thursday. However, some more clarity may be provided on the future monetary policy outlook

  • UBS says that an expected pick-up in real rates, thanks to Fed starting QE taper, may result in silver price slumping back below $20.00 per ounce

ETFs continued to sell gold while buying palladium. Holdings of silver and platinum were little changed so far this week. Source: Bloomberg

Silver broke above the upper limit of the upward channel last week but failed to sustain the move. Price pulled back into the range of the channel following a failed test of the early-September highs in the $24.70 area. Lower limit of the Overbalance structure, and a key near-term support, can be found at $23.97. This week's ECB meeting and, more importantly, next week's Fed meeting are key near-term events for precious metals. Source: xStation5

Wheat

  • Wheat trades near 2021 highs in the 765.00 per bushel

  • Upward move on the wheat market resumed following news of bad weather impacting crops. In Europe, dry weather is expected to hamper crop in Ukraine and Russia

  • Apart from unfavourable weather, outlook for wheat crop in the future season is also being put under question given high and rising prices of fertilizers

  • USDA report showed that 46% of the US winter wheat crop is in good-to-excellent condition, a big miss compared to 54% expected

  • According to USDA, global wheat stockpiles are expected to drop to the 5-year low this year

WHEAT climbed and once again tested the resistance area at 765.00, marking this year's highs. The first attempt of breaking above was a failed one but commodity is trading within an ascending triangle pattern that is considered a continuation pattern. As fundamentals are supportive, a break above 765.00 cannot be ruled out. In such a scenario, the next support to watch can be found at the 127.2% exterior retracement of Q2 drop (812.50). 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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