Commodity wrap - Oil, Gold, Natgas, Cocoa (29.07.2025)

Oil

• Next week's OPEC+ meeting is expected to result in a decision to increase oil production by approximately 550,000 barrels per day (bpd) in September, marking the second consecutive monthly increase and effectively unwinding the full 2.2 million bpd voluntary production cuts.

• Despite these anticipated increases, prices remain relatively high, largely driven by strong seasonal demand.

• While Saudi Arabia has already boosted production by several hundred thousand bpd, exports have remained flat due to a significant rise in domestic consumption during the summer holiday period.

• Saudi Arabia's decision to raise export prices for Asian buyers for the second consecutive month underscores the high demand.

• Donald Trump has indicated his intention to accelerate the timeline for Russia to engage in substantive peace talks with Ukraine. He previously suggested a 50-day window, with the potential imposition of 100% secondary tariffs as a punitive measure.

• While theoretically a potent tool, such tariffs would expose major economies like China, India, and Turkey to significant risk.

Oil prices remain in consolidation, capped by the 200-period moving average. Although trade risks have largely receded, existing agreements are still set to constrain global economic growth. Given the anticipated production increases by OPEC+, prices could revert to a downward trajectory in the autumn, once the summer demand surge subsides. Source: xStation5

Gold

• A recently concluded trade agreement between the United States and the European Union has significantly reduced risk from the perspective of the US dollar. This strengthening of the dollar, its most robust performance since May, has negatively impacted gold prices, which have fallen to a 20-day low.

• The Federal Reserve is commencing its two-day meeting. While no change in policy is widely expected, the possibility of two dissenting votes for a rate cut cannot be entirely ruled out.

• Even minor dissent within the Fed would mark the first such occurrence in some time, potentially undermining Chairman Powell's current position and leading to renewed weakness in the US dollar, which would be supportive for gold.

• JP Morgan has raised its fourth-quarter gold price forecast to $3,675 per ounce, citing strong central bank purchases and geopolitical uncertainty.

• In the long term, gold prices continue to be underpinned by concerns regarding the exceptionally rapid growth of US debt and a broader shift away from the dollar as a reserve currency, with a greater focus on gold.

Gold prices have been consolidating since April, trading below their 25 and 50-period moving averages for an extended period. The key support for the current uptrend is the 100-period Simple Moving Average (SMA), which has acted as support since October 2023. This average is now close to the $3,260 per ounce level. Source: xStation5

Natural Gas

• A new trade agreement between the US and the EU reportedly targets $250 billion in energy commodity imports, a figure that appears extraordinarily high.

• Reuters suggests that fulfilling such a declaration would necessitate a reduction in EU purchases from other global regions and a near-exclusive focus by American exporters on the European market.

• According to the EIA, total US energy exports worldwide in 2024 amounted to $318 billion. In the same year, EU countries imported $76 billion worth of crude oil, fuels, LNG, and coal (Reuters calculations based on Eurostat data).

• It is crucial to note that private companies, not the US government or the European Commission, handle these export and import operations.

• Countries like Japan and South Korea have also expressed strong interest in importing US energy, which would generally require a threefold increase in current US export capacity.

• Currently, the United States is the primary supplier of both LNG and crude oil to the EU, accounting for 44% of Europe's LNG market and over 15% of its oil imports.

• Theoretically, Europe could increase its LNG purchases from the US by approximately $50 billion if supply could meet this demand.

• While US electricity generation from natural gas is higher than last year, it remains relatively modest compared to the impact of high production. On Monday, natural gas production reached 108.6 bcfd (+4.1% week-on-week), while demand stood at 82.8 bcfd (+11.5% year-on-year). LNG exports were 15.0 bcfd, nearly 2% higher than the previous week.

• Weather forecasts for the coming week indicate normal to slightly lower temperatures, with a return to somewhat higher temperatures anticipated in two weeks. Nevertheless, production remains sufficiently high that inventory builds should continue to be substantial.

Natural gas prices are in consolidation following sharp declines early last week. Weather forecasts for the current and coming weeks point to slightly lower temperatures than in previous weeks, which could temper consumption. Source: NOAA

There is theoretically a chance to test the vicinity of $3.0/MMBTU. Conversely, should consumption significantly increase, initial resistance will be around $3.3/MMBTU at the 23.6% retracement, and subsequently around $3.5/MMBTU. Source: xStation5

Cocoa

• Cocoa prices opened the week at a three-week high amidst concerns over a slowdown in export pace from Côte d'Ivoire.

• Port deliveries for the entire season amounted to 1.75 million tonnes, a mere 6.1% increase compared to the same period last year. This differential was as high as 35% in September.

• Prices have, however, rebounded since mid-July, following highly negative demand data for Q2.

• This week, attention will turn to the earnings reports of companies like Hershey and Mondelez, although other company results to date have indicated continued sales challenges due to high prices.

• Nevertheless, market reports suggest that favourable weather conditions in recent weeks bode well for the main season, which commences in October.

Cocoa prices are rising to three-week highs amid supply concerns. Simultaneously, recent demand data has not been encouraging. Despite this, the price has broken above a downtrend line and is currently testing resistance at the 38.2% retracement of the last decline. The next significant target could be around 9200 at the 50.0% retracement level. Source: xStation5