Commodity wrap - Oil, gold, corn (01.06.2021)

Oil:

• Oil price broke above recent local highs, reaching highest levels since 2018
• The OPEC + meeting itself is unlikely to bring any changes, the current moderate production pick-up is valid until July, which means that further changes are likely to be presented in the next few weeks. Currently, there is talk of another 3-month agreement under which the production would be increased by another 2 million bpd
• The latest technical forecasts from the OPEC + group pointed to a clear deficit, but related to lower supply rather than rebounding demand
• On the other hand, many financial institutions are increasing their forecasts of global oil demand. According to ANZ, the deficit in Q3 will amount to 750k bpd, while in Q4 deficit may reach 900k bpd, including the additional 500k bpd from Iran 
• Iran remains a key player in the oil market. The authorities announced that when sanctions are lifted, the country is able to increase its production capacity to 6.5 million bpd. Before the pandemic and sanctions, Iran produced 4 million bpd (although production was limited due to output cut agreements)
• Talks regarding the nuclear deal need to make some progress ahead of the country's mid-June elections. There has been a record amount of uranium enrichment recently, which may be an obstacle to progress in the talks
• Nevertheless, the agreement is already priced-in by the market, although no one expects that production will reach 6 million bpd. This amount was produced by Iran in the 1970s.

Forecasts do not assume Iran will resume production soon. Agreement can be reached before the end of August. Source: Bloomberg

Iran produces over 2 million bpd, but officially exports "almost nothing." Therefore, the entry into force of the agreement is important, not the pace of increasing production. In this case, Iran may quickly start exporting up to 2-3 million bpd a day. Iran's further action could have a huge impact on the oil market. Source: Bloomberg

WTI crude oil is breaking through the recent local highs. If the price stays at these levels, the next key resistance to watch lies at $ 76.00 level, where local high from 2018 is located, supported by the local low from 2012. Source: xStation5

Gold:

• Gold price remains above the $ 1,900 per ounce mark. Again comments that gold is a hedge against inflation emerge on the market, although research shows that this is not the case
• Gold is doing well in the long term and in times of really high inflation. The mere surprise and fear of inflation cause an increase in bond yields, which are negative for gold. Therefore, now the key factor to watch is the behaviour of bond yields, which may indicate the further direction of gold prices
• ETFs have been buying gold recently, but there is no clear upward trend in sight. Speculative investors, on the other hand, have returned to the gold market, suggesting some investors have moved from the cryptocurrencies
• Gold began to gain noticeably as Bitcoin stalled around the $ 60,000 mark. Interestingly, at one point one could see a clear correlation between gold and Bitcoin Cash. This was due to the fact that Bitcoin was then relatively expensive compared to other available assets​​​​​​​

ETFs show no acceleration in the pace of purchases. Meanwhile investors return to the futures market. Source: Bloomberg

Gold prices began to increase when Bitcoin broke above $60,000. Bitcoin's problems were a positive signal for gold and other assets, including altcoins and tokens. Possible further problems in the cryptocurrency market would certainly be positive for the gold market. Source: Bloomberg

Gold gained almost 14% since the March low. This was caused by Bitcoin's weakness, but also the lack of increases in bond yields. The last clear price gap on the TNOTE chart is related to the rollover, so we still do not see a return of bond yields growth despite many signs of inflation. Source: xStation5

Corn:

• Approximately 90% of U.S. corn sown is complete
• Further concerns about summer weather that could reduce the potential corn harvest appeared
• The first data on the quality of US corn crops will be released late tonight
• Despite previous concerns about China canceling agricultural commodity purchases, the country's demand is doing well and deliveries are going smoothly
• USDA last week confirmed more than 5.6 million tons of corn sold to China in the new season. It is the largest sale of this raw material to China recorded this year

After an 18% correction, the price of maize is trying to recover and has already risen more than 10% since the recent bottom. One can see that the seasonality shows that potential lows may appear at the end of July. There is also a clear reduction in the net positioning. Source: xStation5