Commodities Weekly: Trump tweets hit crude oil

Progress in the US-China trade negotiations resulted in US President Trump pushing back the March 1 deadline for additional tariffs on Chinese goods. This helped lift the metals and energy space and boosted most agricultural commodities. Oil reversed as Trump tweeted it was too high.

Energy

CRUDE OIL prices retreated from more than 3-month highs yesterday, posting the biggest one-day loss so far this year, after US President Trump targeted OPEC with his tweets. Trump tweeted that oil prices were too high and that economies could not take another price hike. He called on OPEC to “relax”. The fact that Trump’s decision to defer the March 1 deadline for additional tariffs on Chinese goods contributed to higher oil prices seems to have been ignored. Prices fell 2.9% yesterday, the biggest one-day fall since December 24.

Hedge funds reportedly increased their long bets for higher Brent prices for the seventh straight week last week, according to Bloomberg, while money managers also increased their net long positions to the highest since October.

NATURAL GAS continues to eke out gradual gains from 14-month lows as the continuing cold snap across the US bolsters demand. In contrast, the UK is enjoying a bout of milder weather which has trimmed demand there.

China’s Liquefied Natural Gas (LNG) imports hit a record 6.58 million tons in January, a 28% increase from a year earlier, as demand for winter heating grew and a pickup in official campaigns for cleaner burning fuel that promotes gas over coal.

Gas is now at 2.808, 9.2% above the 14-month low on February 15. The 55-day moving average at 3.156 is below the 200-day moving average at 3.166 today, the first time since July 5 last year.

Natural Gas Daily Chart

Source: OANDA fxTrade

Base metals

“Significant” progress in the US-China trade talks helped COPPER reach the highest in almost eight months yesterday amid expectations that a deal would rekindle demand for the industrial metal. In addition, warehouse stocks of the metal tracked by the London Metal Exchange are at their lowest since 2005 as daily inventories have decreased in 15 of the last 16 days.

The rebound in copper prices since the start of the year has caught many speculative investors short. Data to February 5 shows investors reducing net short positions for a third straight week bringing them to the lowest since the week of December 18. Copper is now at 2.9310 and is eyeing the 61.8% Fibonacci retracement of the June to January decline at 3.0026.

Copper Daily Chart

Source: OANDA fxTrade

Precious metals

GOLD continues to consolidate after hitting 10-month highs last week and is currently nestling in the middle of the month’s range at 1,329. The 100-month moving average at 1,355.85 appears to be capping prices for now, as it has done since April last year.

Speculative investors increased their net long positions for a second straight week in the week to February 5, according to the most recent data snapshot from CFTC.

SILVER likewise has had a stable week of consolidation, lacking any direction with no impetus coming from a slightly weaker US dollar on the week. Speculative investors are still positioned for further upside, with net longs at the highest since the week of November 28, according to the latest CFTC data as at February 5.

The gold/silver (Mint) ratio continues to oscillate around the 55-day moving average, which is at 83.524 today.

PLATINUM looks poised to advance for a third straight week this week after enjoying the biggest weekly gain since late-October last week. The metal has advanced to 857.40, the highest since November 12, and is testing resistance at the 55-week moving average at 857.375.

Platinum Weekly Chart

Source: OANDA fxTrade

The rally has been assisted by supply concerns as a leading South African mining union threatened to broaden a labour strike that has been in place since November. In addition, Bloomberg has reported that platinum holdings in exchange-traded funds are now at their highest since October 2015.

The price discrepancy between platinum and palladium, which touched new record highs this week, has prompted many to speculate that platinum may take a more prominent role as a substitute for palladium in catalytic converters.

PALLADIUM touched 1,555.65 this morning, another record high, as the usual theme of short supply and rising demand continue to play out. Speculative investors snapped a two-week net selling profit-taking spree in the week to February 5, CFTC data shows.

Agriculturals

China’s state grain buyer is said to ready to snap up US CORN in anticipation of a trade deal, as part of a $30 billion commitment to buy US agricultural products. Prices continue to hold above the 100-day moving average at 3.658 and this average has supported prices on a closing basis since September 28. Corn is trading at 3.675 today.

SUGAR is consolidating last week’s move to the highest in nearly 12 months. Despite the recent gains, speculative accounts have been increasing negative bets on the commodity, with net shorts now at their highest since the week of January 8, the latest data from CFTC shows.

A series of supply-side news bytes is keeping WHEAT under pressure this week. Firstly, warm weather in China’s north is expected to boost wheat crops while the US Department of Agriculture’s latest forecasts suggests US wheat output will increase to 1.902 million bushels in the 2019-20 season, an almost 1% jump from the previous season. Thirdly, Egypt, the world’s biggest wheat importer, expects a bumper wheat crop this year, according to the Agriculture Ministry. This would decrease demand on the global market.

Wheat touched the lowest since July in early trading this morning and looks poised for a fourth weekly loss in a row. The commodity is now at 4.624 and is testing the 200-week moving average support at 4.5985.

SOYBEANS remain supported by trade talk hopes, but have yet to break out of this year’s established range. Prices are now at 9.050, with the rising trendline support from the September low still intact, while the 100-day moving average at 8.8460 is set to move above the 200-day moving average at 8.8469 tomorrow. The 55-week moving average at 9.1931 might act as the next resistance level.

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