Commodity Wrap - Oil, Gold, Coffee, Soybean

Oil

• Libyan output increased to 300k barrels per day last week, marking further improvement in country's oil sector

• Resumption of operations on Sharara oil field may boost Libyan production to 0.5-0.6 million barrels per day

• Morgan Stanley expects Libyan production to recover to 1 million barrels per day by March-2021

• OPEC+ will ease supply cuts by 2 millions barrels per day starting from the next year

• While seasonal patterns hint at a period of builds, oil inventories continue to decline

• Futures curve became much more flat than it used to a month ago and now shows annual contango to be smaller than $3

• The latest set of trade data showed Chinese oil imports jumping 5.5% MoM in September and reaching 11.85 millions barrels per day. Nevertheless, S&P Platts signals that data from tankers does not point to any major changes in October

Oil inventories continue to decline in spite of seasonal patterns hinting at builds. Seasonal peak should take place by the end of November. Source: Bloomberg

Futures curve for the oil market is much more flat than it used to be a month ago. Source: Bloomberg

Gold

• ETF gold purchases slowed

• Data for August showed promising Indian imports. However, data for September confirmed that demand for gold remains weak in the country 

• Bloomberg suggests that demand for physical gold may rebound soon due to Diwali festive scheduled for November

• It should be noted that coronavirus pandemic has greatly limited the scope of a festive. On the other hand, a drop of $100 from all-time highs may serve as an incentive for buyers

• Gold has been trading lower before the 2016 presidential election and continued to do so after the ballot. Recovery started at the beginning of 2017

ETFs slowed gold purchases recently. Source: Bloomberg

Gold demand in India remains weak. However, there is a chance for demand to rebound in the coming weeks. Source: Bloomberg

Gold has been trading lower before and after the US presidential election in 2016. Recovery began at the beginning of 2017. Situation may play out similarly this year in spite of who will win the elections. However, Trump's victory may hint at long-term USD weakening. Source: xStation5

Coffee

• Coffee is trading relatively low

• Investors reposition themselves, what may have negative impact on prices

• Declines in coffee inventories slowed down significantly. BRL strength could be a key driver of coffee price rebound

Repositioning of speculative capital can lead to a short-term weakness in coffee prices. Source: Bloomberg

Declines in coffee inventories slowed down, what could be another factor negatively impacting coffee prices. Source: Bloomberg

Soybean

• Speculative positioning on soybean market is extremely high

• Soybean and corn have reached peaks according to seasonal patterns. Patterns hint at a period of range trading on soybean market

• Price is pulling back from a key resistance at $10.70 per bushel

• On the other hand, US soybean exports to China are looking very promising

Net positioning on soybean is extremely high. Levels seen currently hinted at commodity being overbought in 2012, 2014, 2016 and 2018. Moreover, short positions are at the lowest level since 2013. Source: Bloomberg

Exports to China are rebounding strongly. Source: Bloomberg

Soybean is pulling back from a key resistance amid extremely high speculative positioning. Source: xStation5