Clearly most short-term speculative accounts have reduced positions dramatically, as also seen in ETF net-long positions, whilst long-term investors have stayed put, and are possibly first watching Wimbledon and now the Tour de France, with no intention to escalate positions.
Still, they may choose to stay alert like Annie and keep some powder dry for flash crashes, dips and stop related sell-offs as the secular trend for commodities remains intact.
Risk-off in June reduced investor net-length significantly, back below 2008/2009 and 2010 highs despite underlying demand being intact and weather disruption supportive factors.
Source: Morgan Stanley analysis
Oil prices floored
Oil prices found the floor after the International Energy Agency hiccup. Again, as shown in CFTC data, speculative accounts have reduced net longs in WTI and Brent and most major top five banks which were premature in hiking oil price outlooks have now revised outlooks down by $10, still eyeing WTI $110 and Brent $125.
The IEA 60 mln barrel release seems to be oversubscribed, already indicating firm underlying demand clockwise from Sapporo to Vladivostok, so the impact of the emergency stock release on the global balance is likely to be relatively short-lived and long-term bullish.
IEA inventory release showed yet another draw higher than expected and boosted by positive U.S. economic data releases, WTI finished this week at the highs of 98,60 from last Fridays 94,50 whilst underlying fundamentals remain bullish for oil as we are living with no spare capacity.
Source: Bloomberg
Natural Gas traders akin with US weather prophet
You really have to be a U.S. weather prophet to week trade natural gas to determine if air conditioning is on and off with no correlation with Dow Jones. U.S. natural gas futures slid more than four percent lthis week, pressured by weaker cash gas and improved nuclear generation despite some ongoing heat. Inventory data caused another day tumble to lows of $4.13 MMBtu. The IEA storage report showed 95 Bcf injection much higher than expected and with the deficit set to evaporate before summer ends, the outlook for gas is looking increasingly bearish.
Precious metals – Hype is behind us
When my Mum and cab driver do not mention silver and gold for three weeks, then I know the Q1 hype and price rally is behind us. Also ETP silver product flow shows the smallest net long positions in three months and with a clear indication that speculative accounts are not willing to take gold prices higher than1550 - with producer hedging obvious and break-even prices for cost of production putting a firm bottom under the market around 1200 ex profits - then around 1400 seems to be the absolute floor currently from a demand/supply perspective.
However good news from the global auto sales industry is keeping a floor under platinum prices after the Japanese tsunami earthquake related soft patch trend. Gold wobbled back and forth this week on ratings issues and closed 3% up on the week.
With positions being fairly neutral, the next move will be fierce, so stay alert!
When my Mum and cab driver do not mention silver and gold for three weeks, then I know the Q1 hype and price rally is behind us. Also ETP silver product flow shows the smallest net long positions in three months and with a clear indication that speculative accounts are not willing to take gold prices higher than1550 - with producer hedging obvious and break-even prices for cost of production putting a firm bottom under the market around 1200 ex profits - then around 1400 seems to be the absolute floor currently from a demand/supply perspective.
However good news from the global auto sales industry is keeping a floor under platinum prices after the Japanese tsunami earthquake related soft patch trend. Gold wobbled back and forth this week on ratings issues and closed 3% up on the week.
With positions being fairly neutral, the next move will be fierce, so stay alert!
Agriculture – China steps in
Next week is busy again as USDA and WASDE report crop conditions, ending stocks and production and with U.S. weather changing by the minute all grain products are facing volatility going into next week.
This week however was recovery week followed by last week's dramatic limit down sell-offs in wheat and corn on the back of acreage and ending stocks data, with major news that China was stepping in buying corn for storage again.
Next week is busy again as USDA and WASDE report crop conditions, ending stocks and production and with U.S. weather changing by the minute all grain products are facing volatility going into next week.
This week however was recovery week followed by last week's dramatic limit down sell-offs in wheat and corn on the back of acreage and ending stocks data, with major news that China was stepping in buying corn for storage again.
Russian wheat sales continued to weigh on the market amid seasonal
pressure from U.S. winter crop harvests and crop conditions for corn and
beans are pretty good because the weather is helping the yields, so the
market is currently capped on the upside too.
Corn prices rallied a good 4% after the wash out last week, boosted by sentiment, fresh Asian buying and higher oil and sugar prices, leading corn higher through ethanol demand
Corn prices rallied a good 4% after the wash out last week, boosted by sentiment, fresh Asian buying and higher oil and sugar prices, leading corn higher through ethanol demand
U.S. rice futures close solidly higher as India's agricultural
minister switches course to say he will not push for grain exports. A
continued ban on grain exports from India most likely means increased
demand for rice from other countries and with India being the
second-largest producer after China, but also consumer, it remains a key
driver for rice prices when exports are regulated.
Source: Bloomberg
No Cocoa please, but hot Coffee and plenty of Sugar
Coffee
Parts of Brazil's Minas Gerais coffee belt were mildly hit by frost this week and supported current prices. Frost can kill coffee trees' leaves and branches, reducing output in the following year's crop. Such freezes are rare but this is the worst since the last major freeze in 2000 occurred last week, but was mostly confined to minor producer Parana. Being the world's largest producer of Arabica coffee, Brazil remains the one and only coffee price factor with Vietnam producing Robusta instead. All in all it’s all down to weather and frost in Brazil, so risk remains for higher Caffe Latte prices at your corner cafe.
Parts of Brazil's Minas Gerais coffee belt were mildly hit by frost this week and supported current prices. Frost can kill coffee trees' leaves and branches, reducing output in the following year's crop. Such freezes are rare but this is the worst since the last major freeze in 2000 occurred last week, but was mostly confined to minor producer Parana. Being the world's largest producer of Arabica coffee, Brazil remains the one and only coffee price factor with Vietnam producing Robusta instead. All in all it’s all down to weather and frost in Brazil, so risk remains for higher Caffe Latte prices at your corner cafe.
Sweet Sugar up 10%
The queue of ships waiting to load sugar at Brazilian ports rose from 64 to 86 this week, as the world's largest sugarcane crop nears peak harvesting. Waiting times for ships to load were between 8 and 10 days, which would appear to be much shorter than a year ago when ships faced waits of a month or more at some congested ports when rain repeatedly interrupted loading.
UNICA revised down cane crush estimates and sugar took off to the moon and continued production fears in Brazil is keeping front prices firm and squeezed this week, whilst deferred contracts 2012 are still trading 20% lower than spot. Super low inventories, Brazilian harbour congestion and long speculative longs are keeping front prices sweet as well.
The queue of ships waiting to load sugar at Brazilian ports rose from 64 to 86 this week, as the world's largest sugarcane crop nears peak harvesting. Waiting times for ships to load were between 8 and 10 days, which would appear to be much shorter than a year ago when ships faced waits of a month or more at some congested ports when rain repeatedly interrupted loading.
UNICA revised down cane crush estimates and sugar took off to the moon and continued production fears in Brazil is keeping front prices firm and squeezed this week, whilst deferred contracts 2012 are still trading 20% lower than spot. Super low inventories, Brazilian harbour congestion and long speculative longs are keeping front prices sweet as well.
Cocoa, O’Boy
The cocoa surplus for the 2010-11 season is likely to affect the market in the third quarter as shipments resume from top producer Ivory Coast, which produces 1/3 of world output.
Rains in the Ivory Coast's key cocoa growing regions last week were ample for the development of the mid-crop until late August and the Ivory Coast is now the end of the 2010/11 season with a bumper crop well ahead of target largely due to good rains.
The cocoa surplus for the 2010-11 season is likely to affect the market in the third quarter as shipments resume from top producer Ivory Coast, which produces 1/3 of world output.
Rains in the Ivory Coast's key cocoa growing regions last week were ample for the development of the mid-crop until late August and the Ivory Coast is now the end of the 2010/11 season with a bumper crop well ahead of target largely due to good rains.
Cocoa purchases in the world's number two grower Ghana reached
940,000 tonnes by mid-June, putting output over 50 percent ahead of last
year and the bumper harvest had strained storage facilities and led to
some congestion at some port and depot facilities.
Market prices have peaked and market direction looks bumpy with negative bias.
Market prices have peaked and market direction looks bumpy with negative bias.
Copper, force majeur decouples C from C
Production at Collahuasi copper mine, the second-largest in the world has reportedly fallen to 30-40% of capacity over the past week due to on-going adverse winter weather conditions.
Indeed, current weather conditions were described as a once in "every 50 to 65 years" also as supply-disruption in Chile has come from the separate threat of a 24-hour strike by workers at Codelco, the world's biggest mining company. The final concern on the supply-side has come from Grasberg mine in Indonesia being the third-largest mine globally. The seven day strike at the mine has reportedly reduced the mine site to operating at close to 10% of capacity. So copper rallied for others reason than the Chinese rate hike which would otherwise put pressure on prices. So, Copper has decoupled from China gaining yet another 4 percent this week on top of last week’s rally. The trend is your friend, so be it.
Production at Collahuasi copper mine, the second-largest in the world has reportedly fallen to 30-40% of capacity over the past week due to on-going adverse winter weather conditions.
Indeed, current weather conditions were described as a once in "every 50 to 65 years" also as supply-disruption in Chile has come from the separate threat of a 24-hour strike by workers at Codelco, the world's biggest mining company. The final concern on the supply-side has come from Grasberg mine in Indonesia being the third-largest mine globally. The seven day strike at the mine has reportedly reduced the mine site to operating at close to 10% of capacity. So copper rallied for others reason than the Chinese rate hike which would otherwise put pressure on prices. So, Copper has decoupled from China gaining yet another 4 percent this week on top of last week’s rally. The trend is your friend, so be it.
Source: Bloomberg
By Kjeld Lynggaard, Senior Manager, Trading Advisory on behalf of Ole Hansen.
No comments:
Post a Comment