Commodity Wrap - Oil, Gold, Natural Gas (10.08.2021)

Oil

• A lot of uncertainty related to oil demand during a period of OPEC+ supply increase

• China released part of its strategic oil reserves in order to boost available supply and limit imports

• This may suggest that short-term demand is artificially lowered

• Potential demand signal on W1 interval - Brent near key support (double bottom on the chart)

• Demand for oil in the United States remains strong. Prices in some regions start to approach $4 per gallon. In the past prices above $4per gallon were reached only when oil price was above $90 per barrel

US oil demand remains strong. Gasoline inventories are at a 5-year low for the current period. This exerts upward pressure on prices. Source: EIA

Potential demand signal on OIL at W1 interval.  A potential bullish pattern may suraace on the chart near key support at $70. Source: xStation5

Natural Gas

• Natural gas prices begin to stabilize in the $4 per MMBTU area

• Short-term demand in the US may be negatively impacted by drop in temperatures

• Natural gas inventories increase slower than the 5-year average. Limited supply contributes to such a situation. Supply is near 5-year low for the current period

• Natural gas remains oversold by speculators 

Supply exceeds demand, which is usually the case for summer period. Inventory levels before the heating period will be key. Source: EIA

Natural gas prices pulled back after recent steep gains. An important support can be found ahead - upper limit of the earlier broken upward channel. Seasonal patterns suggest that bigger upward moves should begin in fall-winter period. Source: xStation5

Gold

• Latest solid data from the US jobs market increase chance of faster reaction by the Federal Reserve

• More US central bankers see a chance for a QE tapering this fall. Jackson Hole symposium at the end of August or September's Fed decision could be use for announcement

• Federal unemployment programmes will end in September therefore data can be seen as really good. Nevertheless, Powell may continue to repeat that losses on the jobs market have not been recovered yet

• Current employment is 5-6 million jobs lower compared to pre-pandemic levels

• Market prices in a 35% chance of Fed rate hike in December 2022. Increase of the odds above 50% could trigger declines on the gold market. Gold price could drop towards $1,650, especially if yields jump to 1.7-1.8% area

• EURUSD trades near 1.1700, just as it was in March this year when gold traded below $1,700. That was the range of recent flash crash on gold market that occurred in low liquidity environment

• US 10-year yields remain stable near 1.3% - the highest level since mid-July

Comments from US central bankers. Most of them expect fast normalization but Powell remains unconvinced. Source: BloombergTV

Market odds of rate hike in December 2022 and gold price. Source: Bloomberg

78.6% retracement looks to be an important level for bulls. Drop below this area can pave the way for a retest of the $1,700 zone, given the 1.1700 level of EURUSD. Source: xStation5