Commodity Wrap - Oil, Copper, Gold, Corn (20.04.2021)

Oil

• Oil gains amid US dollar weakening

• Potential for fuel demand recovery in the United States

• Global mobility data remains key to watch, air traffic remains depressed

• Oil production in Libya dropped below 1 million barrels per day following domestic port blockade

• OPEC+ plans to skip the ministerial meeting next week. Meeting of JMMC is expected to take place

• This shows that OPEC is confident in its strategy and continues to assume a significant demand recovery in near-future

• Today marks anniversary of oil prices turning negative

• In spite of an improvement in the pandemic situation, pandemic is far from over. Big jump in new cases in India has led to a 15% cut in refinery capacity

Current situation in the United States looks similar to a peak from last year. Mobility in the United Kingdom is improving. However, mobility remains lacklustre in other European countries, like for example Germany or Italy. Source: Apple

Oil inventories are approaching a seasonal peak, what may provide support for prices. Source: Bloomberg

Copper

• Weaker US dollar supports copper price gains

• Record Chinese imports in March, stellar Q1 data from China

• Copper price premium in China is declining, what can be reasoned with higher inventories. High inventory levels decrease concerns over availability of the commodity

• However, decrease in premium may result from "exhaustion" of Chinese buyers and lack of policy changes from PBOC since May 2020

Copper stockpiles sit near levels from Autumn 2020. There are no concerns about availability of the commodity. Source: Bloomberg

Copper price premium in China dropped significantly. A point to note is that premium exceeded $100 per tonne last year. Biggest decrease in price premium took place in June-September period, when copper prices were ranging trading below 7,000 USD per tonne. Copper prices began to rise in September. Source: Bloomberg

Current performance of copper prices resembles the one from 2011, when prices reached record highs. Source: xStation5

Gold

• Gold price pulled back from a key resistance zone near $1,800

• Precious metals found themselves under pressure after yields resumed upward move

• EURUSD above 1.20 should support gold price gains

• Gold ETF holdings dropped below 100 million ounces. Nevertheless, pace of ETF sales has slowed and situation from 2018 and 2019 hints that it could be a turning point for gold

• Should sell-off on cryptocurrency market continue, precious metals ETF may benefit from increased inflows

Pace of gold selling by ETFs has slowed, what may be an important signal for gold. Source: Bloomberg

Gold continues pullback launched after failed attempt of breaking above $1,790 area. The near-term support to watch is marked with the upward trendline and the lower limit of the Overbalance structure at $1,755. On one hand, pick-up in US yields is pushing gold price lower, while on the other, gains on EURUSD market should support resumption of the upward move. Source: xStation5

Corn

• Strong gains return to grains markets - corn tests 600 cents per bushel

• The latest US data on corn sowing shows relatively good situation but worse than expected

• US corn acreage increased from 4 to 8% (exp. 8%)

• Expected return of slightly negative temperatures in the United States, support gains on grains markets

• Fitch boosted price outlook for corn but it remains below current market price until 2025. Fitch expects prices to drop after the current season

• Diseases affecting lean hogs in China may lead to lower imports from the United States and South American countries

• CFTC positioning resembles situation from 2011, what would hint at prices remaining at elevated levels for the majority of the year (most likely until harvest)

Corn sowing in the United States remains above 5-year average but below market estimates. Low temperatures expected this week may delay the sowing process. Source: Bloomberg

Speculative positioning on corn starts to resemble the situation from 2011, especially when we take a look at a very low number of open short positions. Such a situation suggests that elevated prices may be here to stay for a few months. Source: Bloomberg