Commodity Wrap - Oil, Natural Gas, Wheat, Gold (16.03.2021)

Oil

• OPEC expects higher oil demand by the end of 2021. Global demand may reach 99 million barrels per day

• Given no major changes in OPEC's production and gradual increase in Russian output, oil market deficit may reach 3-4 million barrels per day

• In case such deficit remains while demand recovers, oil prices may rally towards $100 per barrel

• It is not the base case scenario. It should be noted that Russia pressures OPEC to boost production. Iran will be able to produce up to 2 million barrels of oil per day if it strikes a deal with the United States. US production may also be brought back more quickly if high prices prevails

• Having said that, market should balance below $80 per barrel

• Such price levels would require significant improvement in global demand

Demand for OPEC oil may exceed 28 million barrels per day by the end of 2021, averaging above 27 million throughout the year. Currently, OPEC produces less than 25 million barrels per day. Source: OPEC

OPEC production sits at less than 25 million barrels per day. Source: OPEC

Oil is pulling back following a failed attempt of setting a new post-pandemic high. $60-62 area can be seen as a key support zone marked with the lower limit of the upward channel. Źródło: xStation5

Natural Gas

• Natural gas prices decline as heating season nears an end

• The latest forecasts signal that natural gas storage may decline 10-20 billion cubic feet - small drop for this period of the year

• Natural gas prices dropped by $2.5 per MMBTU. The nearest support can be found at $2.215

• Natural gas storage sits below the 5-year average and significantly below last year's levels. Nevertheless, upbeat weather forecasts signal that an inventory build-up period may begin sooner than hinted by 5-year average

Natural gas storage sits below the 5-year average, but near-term outlook for natural gas demand looks negative. Source: EIA

NATGAS may deepen declines towards the support zone ranging between $2 and $2.215 per MMBTU. Seasonal patterns hint at local low being reached at the turn of April and May. Source: xStation5

Wheat

• The latest WASDE report showed significant changes on the global wheat market

• Massive oversupply remains but demand started to pick-up

• In spite of higher production, increase in demand is even higher, what should lead to lower ending stocks than previously assumed

• Data from the United States look supportive for prices - noticeable decline in ending stocks

Latest WASDE report showed significant changes. Nevertheless, wheat market continues to experience massive oversupply compared to soy or corn markets. Source: USDA

Wheat price dropped below 650 cents per bushel. A pattern similar to 2006 could be in play, when a 140-cent correction followed the first phase of a rally. Source: xStation5

Gold

• Gold price climbed back above $1,700 per ounce

• On the other hand, US yields remain at elevated levels

• Fed decision will be key for gold market. If yields will extend rally after the decision, gold price may find itself under pressure

• Upward trendline and $1,600-1,630 zone will be a target for sellers. Such price levels would be justified given US 10-year yields at 2% (around 1.6% currently)

• On the other hand, if Fed decides to intervene verbally or via some action aimed at limiting yields increase, gold may catch a bid and look towards $1,800

US yields remain elevated. However, gold is recovering and trades above the 38.2% retracement. In case upward move continues until the end of the month, monthly candlestick may paint a bullish reversal pattern. On the other hand, there is still around 2 weeks until the end of the month. Source: xStation5