Commodity wrap - oil, platinum, gold, corn (13.04.2021)

Oil:

• Saudi Arabia intends to deliver crude oil almost as expected by APAC refiners in May
• This means a slow reversal of additional cuts from limited supply in Asia, the potential for increasing export prices clearly limited
• Large oil spreads between Brent crude oil and the price of the Dubai benchmark mean that China may again decide on a larger strategic purchase of oil from the Middle East
• Permian oil rigs begin to bounce back, just like they did in 2016. However, according to US exporters, a return of US oil production to 13 million barrels per day is unlikely
• Iran hopes for a faster nuclear deal. In recent months, Iran has increased its exports to China, but it is not possible to export to other countries without an agreement

Larger spreads between Brent crude oil and the Middle East benchmarks could lead to larger purchases from China. Nevertheless, in the context of previous years, the spread is still relatively low, though the highest since May last year. Source: Bloomberg

Oil rigs in a key region in the US are bouncing back. Source: Bloomberg

Platinum:

• South African production is expected to return this year, but Russian production is expected to drop slightly
• Nevertheless, mining problems in South Africa should not be ruled out due to COVID and problems with energy supplies
• Demand from the automotive sector is expected to increase significantly. There is also a clear dynamics of growth in the industrial sector, which due to "green energy" may be of key importance in the coming years
• The deficit this year is to be very limited, but it depends largely on investment demand, which may accelerate given the very high prices this year. Therefore, it is crucial to observe the ETFs

This year's deficit is expected to be much smaller, but there is still a good chance that investment demand will show its best and the deficit will be similar to previous years. Source: Platinum Investment

ETF's are acting rather neutral this year, i.e. they did not sell, which may give hope for further price increases. It is worth noting that platinum is not heavily overbought by speculators, although short positions remain relatively low, which may pose a risk of a contrarian signal. Source: Bloomberg

Gold:

• Gold returns to declines along with a stronger dollar and higher yields
• The key defense level for bulls is around $ 1680-1700 an ounce, breaking this level gives the prospect of drops to $ 1600 an ounce
• The level of $ 1,600 an ounce of gold would be justified by yields around 2%
• On the other hand, a steady exit above $ 1740-1755 will open the way to around $ 1833 an ounce.
• Recent declines in copper prices due to the lack of further expansion of monetary policy and credit in China may lead to a decline in the ratio of copper to gold prices, which in turn may be a downward signal for bond yields
• Nevertheless, inflation remains the key factor for bond yields

Consolidation of bond yields and the ratio of copper to gold prices. The potential decline in copper prices could be an important signal for gold and bond yields. Source: Bloomberg

The price of gold is trading inside the consolidation zone between $1680-$1755. Only breaking one of these levels may lead to stronger price movements. Source: xStation5

Corn:

• Potential animal disease problems in China could be a potential problem for countries that export raw materials such as corn and soybeans
• At the moment, however, export expectations are very high, and US inventories of both commodities are expected to be lower at the end of the season
• The weather will remain the key factor for corn, which is more likely to be worse than expected
• Corn sowing is only at the initial stage, but is already slightly above the 5-year average and higher compared to 2020. However, this is only the initial phase. The acreage sown in the US has increased from 2% to 4% according to the latest data

The latest USDA report showed another decline in expected US crude oil inventories. Source: Bloomberg

Thanks to good data, the corn is recovering its initial losses from this month. Looking at the seasonality in recent years, maize has been gaining in April and in May in 3 of the last 5 years. The key for the bulls will be a close above the 50.0 Fibonacci retracement. Source: xStation5

-------------------------------------------------------------------------------------------------------------------------------------

Watch this video to master short selling strategies