Commodity wrap - EMISS, Oil, Soybean, Gold (09.01.2019)

In this article we are focusing on the most interesting commodities in recent weeks.

Carbon permit prices (EMISS):

• Somewhat colder weather is expected in the incoming days before lower temperature next week

• Weather forecasts point to possibly lower temperature in Scandinavian countries and the Iberian Peninsula

• Higher temperature compared to a long-term average may act not in favour of carbon permit prices

• Germany is expected to make a decision on its long-term energy strategy

• Supply of carbon permits in the EU is limited by the European Commission due to Brexit uncertainty

The near-term forecast seem to be quite optimistic. Source: Bloomberg

Carbon permit prices have fallen lately, however, deeper falls could be contained. On the flip side, space for higher levels is also limited. Traders suggest that if weather conditions worsen, the price could increase toward 26 EUR. Source: xStation5

Oil:

• Oil price bounce back notably in response to improved sentiment as well as further exports limits by OPEC countries

• Saudi Arabia wants to curb its exports to 800kbpd compared to the November’s level

• The latest exports’ cut (500kbpd) made by Saudi Arabia was focused chiefly on the US

• The shale boom in the US is set to end, employment in the oil sector is falling while a number of oil rigs is going down

• Some signs showing that the oil market is rebalancing could push oil prices in the short-term

• Looser fiscal policy in China could act in favour of a higher demand for crude

December saw the shocking data regarding Iranian oil exports to China (a miscalculation is possible, hence the data could be subject to revisions). Nevertheless, despite that the fact that countries such as China, India, Japan or South Korea are exempt from the US sanctions on Iran, they do not intend to increase oil imports from Iran. Source: Bloomberg

China may substantially bump up oil imports from the US at the cost of Iranian crude. Source: Bloomberg

Oil prices have begun rebounding recently. Another technical resistance might be found nearby $63. Source: xStation5

Soybean:

• European soybean imports from the US rose by 112% during the second half of 2018, the imports might continue rising due to an authorization process of use of US soybean to produce biofuels

• The USDA won’t release its monthly WASDE release due to the government shutdown

• European soybean imports to China is on the rise, the specific numbers are not released due to the shutdown though

• Soybean prices might hit a ceiling relatively soon, the major longer-term resistance is placed at 950c

• Soybean prices seem to have a greater chance to see a rise as US farmers may change their production plans and sow more corn than soybean

EU imports of US soybean as % of total imports rose rose substantially compared to the prior season. The overall EU imports of soybean picked up noticeably as well. Source: foodingredients.com

Soybean prices are limited scope for further gains. This commodity seems to have a better outlook compared to corn. Source: xStation5

Gold:

• Gold prices move back after three weeks of consecutive gains, higher US yields limit further gold rises

• Better market sentiment cause a capital outflow from safer assets

• ETF holdings reached their highest level since the second quarter of 2018, the number of ounces hover around the highs

• CFTC data points to a gradual rise in net longs, the data release has been suspended due to the shutdown though

• Gold prices may decline to $1260 in the near term, albeit the long-term outlook signals rises even toward $1350/1380

ETF holdings hover around the highs. Source: Bloomberg

Gold prices may see a price correction toward $1260. Source: xStation5