Commodity wrap - Oil, Gold, Copper, Corn (15.06.2021)

Oil

• Oil stockpiles continue to shrink and decline is expected to be continued

• US oil stockpiles dropped to the average for 2015-2019 period

• On the other hand, some negative demand factors are surfacing just ahead of the US "driving season"

• Crude prices remain high in spite of a still unclear, pandemic situation. For instance, United Kingdom delay lifting pandemic restrictions by 4 weeks

• Sixth round of nuclear talks between Iran and the United States. Details remain to be discussed. Iran hints that agreement is within reach. United States want to sign deal ahead of Iranian elections (Friday, June 18)

• Spread between Brent and WTI narrows, amid limited exports from the United States. Exports are limited due to domestic demand

US oil stockpiles dropped to the 5-year average for 2015-2019 period. Seasonality hints at continuation of decline in stockpiles. Moving below the average could boost oil prices in the medium-term. Source: Bloomberg

In spite of declining stockpiles, data on gasoline delivered to the market shows that demand remains fragile. It could be seen as a warning signal unless gasoline delivered to the market returns to "normal" levels. Source: Bloomberg

Gold

• Correlation between US dollar and gold has been almost perfect recently

• Yields are correctly pricing current market price of gold

• Performance of gold and US dollar after FOMC decision (Wednesday, 7:00 pm BST) will be key for gold performance over the medium-term

Gold seems to be reasonably priced when looking at the  US dollar and 10-year US yields. Source: Bloomberg

Gold price dropped below the upward trendline. Key support can be found in the $1,830-1,840 area. Source: xStation5

Copper

• Copper deepens decline amid uncertainty related to Chinese demand

• China wants to limit speculation on the metals market. Imports may be limited

• Limited imports could have been spotted in recent days in global stockpiles data. Inventories dropped on the Shanghai exchange as well as all the other major metals exchanges

• Copper may also underperform on the back of a cooling US housing market. Share of the construction sector in demand is as high as 25% depending on the country. A 40% drop in lumber prices can be seen as a sign of a cooling housing market

• Speculators withdraw from the copper market. Large reduction in the number of open long positions. Number of open short positions increased moderately

Copper stockpiles on major exchanges drop, what may help limit price declines. Source: Bloomberg

Big reduction in the number of open long positions on copper. Net positioning has hit record levels from the 2010-2016 period, when copper prices traded in a downtrend. Source: Bloomberg

Copper is experiencing the largest monthly drop in at least a dozen or so months. The nearest key supports can be found at $9,300 and $8,700. Source: xStation5

Corn

• Speculators continue to trim long positions on corn. Short positions remain unchanged

• The latest data on corn has been upbeat. Drop in crop quality and increase in export inspections

• Prices drop amid improving weather forecasts for the United States. On the other hand, data on crop quality does not reflect better weather conditions

• Demand from biofuel producers in the United States may drop given pressure from US refineries on changing gasoline mix

Speculators continue to trim long positions on corn. Source: Bloomberg

The latest data from grain markets. Source: Bloomberg