Commodity wrap - Oil, Gold, EMISS, Wheat (13.03.2019)

Oil:

• Seasonal analysis suggests US oil inventories could begin falling from the end of this month

• If a seasonal decline begins sooner, it could be a signal for further moderate rises in oil prices

• Difficulties in electricity supply in Venezuela may limit oil production despite Russian supplies of paraffin to dilute crude oil

• Production in Libya may increase to 1.2 mbpd after the Sharara oilfield resumes work

• Saudi Arabia points to further production cuts in April, the current limits of output could be extended to the second half of this year

• Low oil output in Mexico, the country could consider pumping more its oil at the cost of imports from the US (a negative factor for prices)

• China has imported a massive amount of oil (more than 10 mbpd, up 22% YoY and the third largest increase in nominal terms)

• A low spread between gasoline and oil prices could hinder demand for crude oil from refineries

Oil stocks should begin falling from the end of this month. Source: EIA

A low spread between gasoline and oil prices could hinder demand for crude oil from refineries. Source: EIA

Oil prices keep rising, albeit some corrective moves should be taken into account. Source: xStation5

Gold:

• After a short-term sell-off in gold prices we’ve come back to rises

• ETF funds’ holdings have ticked up recently

• If the story from 2017 repeats itself one may expect further rises in prices toward $1400

• On the other hand, the RSI oscillator suggests a possible consolidation ahead

• Option market responded positively to the recent fall in the US dollar, based on this measure one may anticipate rises in gold prices over the next 3 months

Gold prices could be close to the end of the pullback. Rising ETFs’ holdings could point to a bullish scenario. Source: Bloomberg

Based on the RSI oscillator one may expect that gold prices could enter a consolidation. Source: xStation5

Carbon emission rights (EMISS):

• Weather forecasts suggest slightly higher temperature over the next two weeks, the level is going to be well above the long-term average

• EMISS prices are quite closed tied to carbon prices, from this relationship one may expect that EMISS prices could fall further

• Current EMISS prices seem to be relatively high suggesting that other factors may limit room for further rises

• EMISS prices look overvalued based on RSI

• Brexit remains the important topic for EMISS prices, if the Article 50 is extended, it could act positively for EMISS prices in the short-term and negatively in the longer one

Higher temperature over the coming days and much higher in April could limit further price rises. Source: Bloomberg

Carbon prices should continue falling. The chart above shows that both carbon and EMISS prices have moved in tandem so far this year. Source: Bloomberg

Wheat:

• The latest data showed that 55% of US wheat crops were rated as “good or excellent” (51% in Kansas and Chicago)

• Global wheat stocks are expected to rise more than initially expected (270.5 million tone vs. 267.5 million tone)

• WASDE report was negative for major grains (higher stocks and lowered exports)

• Wheat prices have reacted in the vicinity of the crucial technical support, the prices look undervalued in the short-term and based on a seasonal analysis one may look for some upticks in June/July

Wheat prices tend to rise in June/July. The current price levels seem to be relatively low compared to the 5-year average. Source: Bloomberg

If the current candlestick retains its shape until the end of the month it could be a buying signal. Larger price increases could come in the mid-year, however, prices could be under pressure in the weeks to come when data show better wheat conditions due to relatively warm winter. Source: xStation5