The holiday mood (and liquidity) was felt all over the commodity markets. Traders are chasing news and this is bringing volatility which is however quickly fading and volumes are declining. The Bloomberg Commodity index increased 0.3% the last week with precious metals and the part of the soft sector among the biggest winners, while the energy and grain sectors were searching for direction.
Crude oil
While crude inventories in the US are on decline, price of crude oil dropped on Friday on reports that OPEC Production could have increased in July by 145K bpd mainly driven increased supplies from Saudi Arabia, UAE and Nigeria. As OPEC having problem with compliance traders will watch closely the OPEC Monitoring Committee meeting and its outcome on Monday. There are rumours that Saudi Arabia could be pushed to cut their crude export to the whole world by 1mil bpd to make room for Libya and Nigeria. This could be hugely supportive for both WTI and Brent.
Last week the US field crude production increased again and it’s approaching the 2015 summer peaks. While rig count declined marginally, the increasing oil production is still bad news for producers. Money managers were increasing their net long for the last few weeks which is the result of liquidating shorts mainly. Is it a major change in the direction or just a preparation for another bear run, I think we will see in a few day or maybe 2 weeks. For bullish confirmation MM definitely need to increase longs too.
Technically no change for now, despite ugly daily chart where a double top formed recently.
Corn
Grain traders are awaiting the USDA Crop Progress report Monday ET 4PM where the main number will be the quality grades for each crop. Due to the above average temperature the main concern in that the USDA corn yield estimate last week was too optimistic and there will be a drop much below 170 b/a. This with an already decrease acreage for the crop could mean a significant reduction in the ending stocks for 2017/2018 marketing year.
Sugar
The sweetener was trading sideways due to lack of news and stable to higher production data from Brazil. In India, which is the largest sugar consumer of the world, the production is set to rebound as the above average monsoon rains are supporting the growth of sugar cane started to be crushed from October. Corrective upside move toward 16.50-17.00 possible based on technical but overall negative outlook medium term (1 year).
Good Luck guys and remember to watch your risk and be consistent. Oh, one more thing! If you are now on vacation, please enjoy your holiday and don’t trade… rest, and regain energy, you’ll need it when you’re back.
Take care
Mr. Tech Man
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