Commodity Wrap - WTI, Copper, Cocoa, Wheat (02.03.2021)

1:39 PM March 2, 2021


  • Oil drops ahead of the OPEC+ meeting on the future of output cuts

  • Saudi Arabia wants gradual restart of production while Russia wants to bring back production more quickly

  • OPEC+ cut in March is expected to be 7.05 mbpd (7.125 mbpd in February). Decisions on future outlook will be key

  • Iranian exports are expected to continue to be pressured by the United States. Exports drop from a 21-month high in February

  • Venezuelan imports dropped below 0.5 mbpd, almost two times lower than a year ago

  • Goldman Sachs expects Brent to average $55 and WTI to average $52 in 2021. However, Q2 forecast of $70 for Brent has been maintained

  • Current deficit on the market resulting from low OPEC production may be as high as 2 mbpd

There were 3 upward waves during the 2016-2018 boom on the oil market. Each was $25 on average and was followed by $10-12 decline. Situation continued until a large price decline in 2018. First upward impulse from 2020 was very similar to this pattern. Current seasonal patterns hint at a possible pull back towards $55 area. Upper limit of the upward channel should act as a resistance. Q2 target remains price zone above $70 and the long-term downward trendline. Source: xStation5


  • Copper prices dropped around 6% since February, to around $9,500 per tonne

  • Seasonal patterns hint at a possible downward move until mid-April

  • USD strength can be named as a reason behind recent copper weakness

  • Copper-to-gold ratio jumped above 5. Ratio sat slightly above 6.5 during a peak 2009 period. Continued rise could suggest continuation in the rise of US yields. On the other hand, an abrupt drop in US yields could be a risk for copper prices

  • Current copper pullback can be reasoned not only with USD strength but also increase in stockpiles on global exchanges, especially in Shanghai

Comparing current situation to 2009, we can expect further increases in copper-to-gold ratio Source: Bloomberg

Copper inventories on global exchanges are rebounding, what may exert pressure on copper prices. Source: Bloomberg

Comparing the current technical situation to 2009, we can see that a correction may be looming that could take the price to as low as $7,500 per tonne. Long-term seasonal patterns support this view. On the other hand, the 50-period moving average and lower limit of the upward channel should act as near-term support levels. Source: xStation5

Lack of credit expansion in China may pose a threat for copper prices in short- or -medium-term. Credit impulse growth slowed significantly and differs from the 2010-2011 situation. On the other hand, recovery in China credit impulse should be positive for copper. Source: Bloomberg, XTB


  • Cocoa prices jumped significantly last week. Price tests upper limit of trading range at $2,700 per tonne

  • Interestingly, expiring march contract trades $100 higher, hinting at strong short-term demand for cocoa. Futures curve shows limited backwardation of $20 over the 1.5-year horizon

  • Net speculative positioning for cocoa is more or less neutral

  • March has been a poor month for cocoa prices over the past 10 years. However, big declines from March last year (coronavirus pandemic) distort the average

March has been a poor month for cocoa prices. However, 3 poor years weigh significantly on the average, with last year's pandemic drop being the best example. On the other hand, April is usually a positive month for cocoa. Source: Bloomberg

Cocoa prices test the upper limit of a recent trading range. $2,700 area is the first target while $2,900 is the second one. In case we see a pullback, the lower limit of the upward channel should be seen as the first support. Source: xStation5


  • Wheat has experienced much smaller volatility than corn or soybean

  • Wheat prices do not react as they did in 2007 or 2010-2011

  • Global fundamentals for wheat remain negative

  • Positioning data does not show a pressure neither from buyers, nor sellers

  • Nevertheless, in case costs continue to rise (oil, alternative crops), wheat prices may continue to rise

  • Small backwardation over 1.5-year horizon

Global end stocks are declining while production and consumption are nearing an equilibrium. Stocks-to-use remain at a very high level compared to history. Source: Bloomberg, XTB

No pressure can be spotted in positioning data. Neither from buyers, nor from sellers. Source: Bloomberg

Wheat prices performed in 2016-2021 similarly to 2002-2006 - slow uptrend with limited volatility. Assuming a similar situation, current correction should lead to highs from previous trading range - 576 cents per bushel - or have a similar range to correction from 2006, leading to 540 cents per bushels. However, in case global stocks decline, price could jump to as high as 1000 per bushel. Source: xStation5


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