HomeResearch and NewsCommodity market Report - February 2020

Commodity market Report - February 2020

COMMODITY MARKET REPORT

EXECUTIVE SUMMARY

Trade war is officially over but Chinese risks resurfaced from the other side - extreme quarantine measures after coronavirus outbreak in Jan-Feb resulted in significant breakdown in the industrial production chains and construction activity. However monetary and fiscal stimuli quickly reversed negative sentiment and overall risk conditions returned to the high Greed mode with only commodities market kept in risk-off mode. Energy complex was very volatile as its initial sharp drop was lately compensated by OPEC verbal interventions and renewed risk in Libya and Venezuela. Industrial metals fell sharply, but Precious shined brightly with unbelievable bubble in Palladium. Agri commodities were mostly range bound with Cocoa being top performer

Macroeconomic drivers turn to negative as positive developments after the Trade Deal signature and record financial markets levels gave the way to fears of world economic slowdown after the virus outbreak. On the other hand there were not many voices for recession as stimulative monetary policy should provide the cushion. However we think that markets overstated willingness of the Fed to keep on printing and the main risk once again turned to the hawkish surprise when it exits REPO stimulus gambit and the ECB to end QE.  

Chinese economy was moderately improving, but virus induced risks point to sharp slowdown in 1H20 with its overleveraged corporate and banking sector needed significant bailouts (airlines have already received it)

Investors’ interest in commodities was really high before quick reversal on Chinese risks. It is still concentrated in retail investors’ money flow as trading activity in commodity futures declined and net positioning moved back to undervaluation with only Precious metals and Cocoa in Greed territories

Weather conditions are gradually switching from moderate of El Nino to La Nino that is going to support grains and nat gas prices and be negative for cocoa. Political risks turned positive for most commodities as Trade War and recession risks abating, Iranian risks are less acute and electricity shortage in S.Africa is positive for Precious

TOP TRADING IDEAS:

➢    Add Short in June Palladium at 2600 $/oz (target 1800 $/oz). Add Long in July Platinum at 850 $/oz

➢    Play the range in Brent: long at 50-55 and short at 65-70 $/bbl. Now take profit in longs at $60

➢    Buy Gold at 1450 $/oz with mid-term target of 1650 $/oz; hedge with Short in Silver at 18.5-19.0 $/oz

➢    Play the range in Cocoa: long at 2300-2500 and short at 2800-3000 $/mt. Take profit in short at $2600

➢    Go long in Coffee at 110-112 cents/lb for May futures with ST and LT targets above 125 and 140 cents/lb

➢    Copper - take profit in short and turn Long at 255-260 cents/lb

➢ Long August Nat Gas futures at 1.8-2.0 $/MMBtu for better fundamentals and target 3.0-3.1 $/MMBtu

Download PDF

commodity;

Read more

Oil Market Report - November 2021

Crude oil prices rallied in October 2021, mainly driven by worries about the supply turmoil in the Europe’s and Asia’s power sector ahead of the winter season, and soaring energy prices, particularly for gas and coal, to historically high levels in Europe and Asia. Investors’ sentiment turned bullish on higher oil demand growth in the winter months from gas to oil switching, particularly in power generation and the refining and petrochemical sectors. Industry sources estimated that surging natural gas prices could boost oil demand by 0.5 mln bbl / d on average from September 2021 through 1Q22. 

oil, investment

Banking Sector Monthly Report - October 2021

US banks underperformed slightly in October 2021 despite their strong absolute performance, the first time of weaker performance vs the broad market over the last three months. Thus, BKX index increased by 6.3% MoM vs +6.9% MoM of SPX index, the third consecutive month of growth in absolute terms. 

investment, banks;

THE GAS MARKET IN EUROPE IN 2021

What has happened with EU gas market (and in less extent globally) in 2021,which lead to 100% + increase in natural gas prices? We should, first of all, focus on the natural factors and the mostly non-professional reaction of the EU regulators (and the governments of some countries) on the problem, raised in the current year. The main reasons for the temporary shortage and the huge gas price jump in 2021


gaz, oil, investment