Commodity Wrap - Oil, Gold, Copper, Wheat

Oil:

• Oil broke above recent local highs with WTI testing upper limit of bearish price gap from March 8

• WTI is outperforming compared to Brent as demand for US crude increased following curbing of OPEC exports

• Some OPEC countries do not comply with the output cut agreement. This relates primarily to Nigeria, Iraq and Angola.However, those countries promised to bring production in-line with agreed cuts

• Futures curve on oil flattened significantly. Higher prices, however, attract more supply

• Oil price saw negative reaction to comments on possible US decoupling from China

Oil futures curve flattened significantly. Source: Bloomberg

Oil WTI (OIL.WTI) tests the upper limit of the bearish price gap from March 8. Source: xStation5

Gold:

• Gold trades near 8-year highs benefiting from USD weakening

• Highs from 2012 can be found in $1,770-1,780 area

• ETFs continue to purchase gold, speculative positioning improved slightly

• Seasonality patterns hint at possible downward correction in near-term

ETFs continue to purchase gold. Speculative position improved slightly. Source: Bloomberg

Gold price is breaking above a potential flag pattern but remains below highs from the second half of May 2020. Seasonal patterns hint at a potential correction in near-term. This can be related to summer being a rather sluggish period for the jewellery industry. Source: xStation5

Copper:

• Copper stockpiles on the Shanghai exchange haven't been this low during this period of the year since at least 5 years

• Stockpiles on most of major exchanges near 5-year lows for the period

• Backwardation (lower futures price until year's end) in China points to strong local demand

• Low number of open short positions, however, could be seen as a warning signal

Copper stockpiles on Shanghai exchange are below 5-year lows for the current period of the year. However, general decline is in-line with seasonal patterns. Source: Bloomberg

Very low number of open short positions and rebounding number of long positions can be a warning signal for copper. Source: Bloomberg

Copper is trading near the upper limit of the downward channel. Should it break above, next resistance levels can be found at 6,200 and 6,600. Source: xStation5

Wheat:

• Strong sell-off on the wheat market can be ascribed to good weather conditions in the United States as well as to concerns over exports

• Tensions between China and the United States may cause either party to walk away from the Phase One trade deal. Such an outcome would deteriorate exports outlook for the United States

• It is expected that wheat stockpiles will increase and reach new record levels (lower panel of the first chart)

Global wheat stockpiles are expected to reach new record levels (lower panel, inverted axis). Source: Bloomberg

Wheat price broke below the upward channel. Seasonal patterns hint that the price might be nearing a seasonal peak. On the other hand, speculative positioning does not hint at wheat being overbought, as it was the case in previous summer periods (2017, 2018, 2019). Source: xStation5