Commodity Wrap - Oil, Gold, Natural Gas, Corn (09.11.2021)

Oil

• Saudi Aramco increased prices for all grades of crude for December delivery to Asia. Increase was bigger-than-expected and one of the largest in a decade

• Aramco's pricing for key grade - Arab Light - was increased by $1.40-2.70, much higher than expected $0.50-1.00 increase

• OPEC+ maintains output policy of increasing daily production by 400 thousand barrels per month

• United Arab Emirates said that if it wasn't for OPEC+, oil prices could be twice as high as they are now. Comment was seen as a hint that OPEC+ is unlikely to back down and succumb to pressures from US or Japan to boost output

• Biden Administration is considering whether to release Strategic Petroleum Reserve to help ease gasoline prices

• CEO of Saudi Aramco said that daily oil demand is expected to exceed 100 million barrels in 2022

• Iran urged United States to drop maximum pressure strategy and change its approach to sanctions ahead of nuclear talks scheduled for November 29 in Vienna, Austria

• Chinese crude imports dropped from around 10m bpd in September to around 8.9m bpd in October - the lowest level since mid-2018

Chinese crude imports dropped in October to the lowest level since mid-2018. Source: Bloomberg

Recent upward move on Brent (OIL) was halted at the 161.8% retracement of the July-August correction and price started to move lower. OIL bounced off the lower limit of the downward channel in the $80 area recently and managed to climb back above 100-period EMA on H4 interval. Upper limit of the channel at $84 is a resistance to watch now. Source: xStation5

Gold

• Gold climbed back above the $1,800 mark following better-than-expected US jobs data on Friday. Interestingly, US yields dropped at the same time

• Weak US dollar also supports gains on the precious metals markets

• Gold trades at 2-month highs ahead of US CPI data release later this week (Wednesday, 1:30 pm GMT

• Market expects US headline CPI inflation to accelerate from 5.4% in September to 5.9% in October

• Both Bank of England and Federal Reserve were dovish when it comes to rate hikes last week giving precious metals more time to benefit from record low interest rate environment

Gold bounced off the lower limit of the upward channel last week and has quickly moved to the upper limit. Precious metal is testing a resistance zone above $1,830, where the upper limit of the channel can be found as well. US CPI reading tomorrow should be watched closely by gold traders as higher-than-expected reading may offer precious metals a lift. Source: xStation5

Natural Gas

• Flows of the Russian natural gas to Europe were expected to increase at the beginning of this week, according to Putin's promise

• Putin ordered Gazprom to start filling up its European inventories

• So far, there is no evidence that higher gas flows actually began, what leads to a jump in European natural gas prices

• Situation lead to natural gas flowing from Germany to Poland - opposite to normal direction

• Russian Gazprom said that it will not sell additional gas supplies at the spot market this week

• While temperatures in the northwestern part of Europe are already below average for this time of the year, forecasts hint at even colder weather next week

Putin promised that natural gas flows to Europe will increase this week. However, as the data on the chart above shows no such increase was made to flows through Central and Eastern European countries. 

Recent pick-up in US natural gas prices lost steam and price has once again headed lower. The lower limit of a wedge pattern is being tested again and a break below could pave the way for a bigger drop. Support zone at $4.80 should be watched in such a scenario. Source: xStation5

Corn

• Corn prices launched a pullback following a failed attempt of breaking above 200-session moving average

• Significant pick-up in the open long position on corn from money managers

• Net speculative positioning at the highest level since early-June 2021

• WASDE report will be released tomorrow today in the afternoon (5:00 pm GMT)

• Report is expected to show a small drop in US corn ending stocks and a small increase in US corn production. Yield per acre is expected to increase from 176.5 to 176.9

Net speculative position on corn sits at the highest level since early-June 2021. Source: Bloomberg

Market expects WASDE report to show lower corn ending stocks, higher production and higher yield per acre. Report will be released tomorrow at 5:00 pm GMT. Source: Bloomberg