Commodity wrap - Oil, Soybean, Copper, Coffee

In this week’s commodity wrap we present you 4 markets that look interesting or/and have posted some major price moves: Oil, Soybean, Copper, Coffee

Oil:

• IEA expects oil production growth to slow in the United States

• IEA signals that agreed OPEC+ cuts are too small and are being implemented to slow

• Saudi Arabia complains about the pace of the Russian output cuts

• Venezuela signed an agreement with US and French companies aimed at boosting oil production in the country

• Iranian exports rose in December, Russian output hits record in the previous month

• Concerns over the possible global economic slowdown cause oil prices to pull back

• Number of active oil rigs in the US is falling

Decline in the number of active US oil rigs is insignificant so far but may evolve into a worrying trend. Source: Bloomberg, XTB Research

Oil surged around 25% since the latest local low. Nevertheless, further upward movement may be limited by the 38.2% Fibo level as well as lower limit of the upward price channel. Source: xStation5

Soybean:

• Prolonging US government shutdown creates hurdles to analyzing soybean market over the short- and medium-term

• Soybeans grain export inspections data points to a weaker beginning of the year than in the past 5 years

• Low prices in Brazil may limit upside potential for the US grains

Declines on the soybean market in USD terms are mostly due to the US currency strengthening. Source: Bloomberg

Soybeans grain export inspections started year below 5-year average but momentum looks promising. Source: Bloomberg

Prices are unlikely to break above 950 cents per bushel unless tariffs are completely removed. Source: xStation5

Copper:

• GDP growth in China fell in 2018 to the lowest level since 1990

• Chinese copper imports declined on annual basis in December 2018

• Dynamics in the past few months suggest that copper production is flat and demand is lacklustre

• Copper stockpiles on exchanges plunged

• Chinese credit impulse begins to rebound

Copper stockpiles on the exchanges slumped severely during the past half a year. Source: Bloomberg

Credit impulse in China begins to rebound. However, it may take time for this development to be visible in stock market valuations. Source: Bloomberg

Coffee:

• Coffee price pulled back towards the long-term support level at 103 cents per pound

• Coffee inventories on stock exchanges rose significantly in the past few months, trend in stockpiles may reverse

• Forecasts point at a solid demand and lack of supply constraints

• Chances of El Nino happening diminish causing outlook on South American production to deteriorate

Coffee inventories on exchanges rose significantly as of late. Source: Bloomberg, XTB Research

Strengthening of BRL suggests that we may experience rally on the coffee market over the short-term. Source: xStation5