Commodity wrap - Oil, Nickel, Coffee, Corn (15.11.2022)

Oil

• OPEC cut global oil demand outlook in its latest monthly report, citing mounting challenges to global economic outlook so far in Q4 2022

• OPEC now sees 2022 oil demand growth at 2.55 million barrels per day, down from 2.65 million bpd

• Global oil consumption is expected to drop 240k bpd in Q4 2022, compared to Q4 2021

• 2023 oil demand growth forecast was lowered from 2.34 to 2.24 million barrels per day

• OPEC lowered its own production forecast for Q4 2022 by 520k bpd

• IEA says that oil inventories in developed nations sunk to the lowest levels since 2004, and it leaves global economy vulnerable to oil supply shock

• IEA expects Russian oil output to drop 1.4 million bpd in 2023 as Western sanctions take effect

• The United Kingdom published guidelines for punishing oil traders that breach the looming price cap on Russian oil. According to those guidelines, traders may face a fine of up to 50% of the amount of the breach

WTI (OIL.WTI) pared some of the losses from Monday and climbed to test $85 handle today. Note that a mid-term resistance zone can be found ranging around $84.40 per barrel and it is a key obstacle to watch in case ongoing recovery move extends. Source: xStation5

Nickel

• Nickel price jumped on Monday, and briefly traded at the 15% upper daily price limit at LME, following reports of an explosion at a plant in Indonesia

• However, reports of a blast proved to be fake news with plant-operator CNGR Advanced Material saying that the facility is operating as usual. Nickel pared big part of earlier gains later on

• Prony Resources, operator of Goro mine (one of the world's largest nickel deposits), reduced production forecast as an aftermath of dam leakages in late-August

• Monthly activity data from China showed further cooling of the Chinese economy in October. Industrial production increased 5.0% YoY, missing 5.1% YoY estimate (6.3% YoY previously), while urban investments were 5.8% YoY higher, compared to 5.9% YoY estimate (5.9% YoY previously)

• Iron ore, nickel and other industrial metal gained on reports of a looming rescue package for the Chinese property sector

NICKEL jumped this week on reports of an explosion at major plant in Asia. While those reports were later deemed fake news, nickel managed to hold onto some of previous gains and continues to trade near 29,850 resistance zone. Source: xStation5

Coffee

• Coffee price continues to move lower, reaching the lowest level since mid-July 2021

• Coffee trades over 30% below late-August high and over 35% below early-February peak

• Coffee price drop was additionally fueled by a big increase in the number of bags pending grading assessment. ICE said that there are over 456 thousand bags waiting for assessment, up from less than 150 thousand bags two weeks ago

• Rainfall in key Brazilian Southern coffee production region stood at 44% of historical average last week

• Contracting demand for coffee significantly shortened queues at key US West Coast ports. Queues stood at just 4 ships last week, down from over-100 earlier this year

• Net speculative positioning on coffee continues to drop as coffee price shows further weakness. A big jump in the number of open short positions pushed net positioning back into negative area

A big jump in the number of open short positions (yellow line on the upper chart) on coffee pushed net positioning back into the negative area. Source: Bloomberg

COFFEE dropped to a fresh 2-month low and trades over 30% below late-August high. An attempt to launch a recovery move in recent days looks to have failed as price turned lower again on an improved data on inventory pending assessment. Source: xStation5

Corn

• Corn prices dropped to a 2-and-a-half month low at the beginning of this week as production outlook in South America improved

• Outlook for US winter grain crop improved but conditions continue to trail 5-year average for this part of the year

• US harvest is progressing quickly with 93% of corn crop harvested, up from 87% in a previous week and 90% at this point of season a year ago

• Grain prices moved lower on media reports saying that UN-brokered Black Sea grain exports deal will be renewed beyond current deadline of November 19, 2022

• Russia said that it has received assurances from United States and European Union on Black Sea grain exports deal

• Net speculative positioning on corn ticked lower recently amid a drop in the number of open long positions. Nevertheless, changes in positioning are in-line with seasonal patterns

Net speculative positioning on corn dropped recently but changed was mostly in-line with seasonal patterns. Source: Bloomberg

CORN dropped below the lower limit of a recent trading range in the 660 area. Downside breakout from the trading range may pave the way for a drop to as low as 619. Source: xStation5