HomeResearch and NewsCommodity market Report - January 2020

Commodity market Report - January 2020

EXECUTIVE SUMMARY

Trade war is officially over as US and China signed the Phase.1 deal in the middle of January. Trump is desperately willing to support financial markets in election year especially as he faces an impeachment process. Overall risk conditions switched to the high Greed mode not seen since the late 2017 with commodities have been finally playing catch up – only Nat Gas, Aluminum and Corn are in Fear mode. Overall Energy complex was very volatile as geopolitical spikes gave way for deeper corrections. Precious metals shined bright and have got overvalued. Agri commodities mostly rose with coffee made an impressive +/- 15% move in just couple of months. Copper and Aluminum are slightly undervalued but saw a rotation from overvalued Nickel

Macroeconomic drivers turn to neutral as the hopes for Trade Deal and monetary stimulus improved business confidence. On the other hand more stable macroeconomic data and significantly reduced trade war risks make dovish expectations from the global CBs less obvious with the Fed is starting to think how to exit its REPO stimulus gambit and the ECB is not going to cut rates anymore. EM economies stabilized with downside risk.   

Chinese economy is moderately improving, but risks are still here: unrest in HK, capital flight, overheated housing market and stress in overleveraged corporate and banking sector with record number of defaults last year

Investors’ interest in commodities was really high over the last months. But it was concentrated in retail investors’ money flow as trading activity in commodity futures declined and net positioning improved moderately with Precious metals and Gasoline are the most overbought and Aluminum and Nat Gas are the most oversold

Weather conditions are in moderate chance of El Nino that is negative for prices of most grains and natural gas, but a little bit positive for cocoa and coffee. 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 2200 $/oz (target 1500 $/oz). Add Long in July Platinum at 900 $/oz

  • Play the range in Brent: long at 50-55 and short at 65-70 $/bbl.

  • 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 2250-2300 and short above 2800 $/mt.

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

  • Copper was a good contrarian buy, now it’s time to take profit and switch to short at 295 cents/lb

  • Long August Nat Gas futures at 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