Tuesday 13 February 2018

Feb 13, 2018 - Commodity Weekly: Suffering commodity space offered nice trade opportunities

A great week for traders is behind, the volatility finally arrived to the commodity markets and more sectors had nice moves during this period. The biggest movers were in the Energy sector were oil and distillates joined the falling natural gas as the updated 2018/19 predictions of increasing US production surprised the markets. The Agri sector had on the other hand nice upside moves caused by weather worries.


Oil
The EIA last week surprised markets with increased estimates of oil production for 2018 and also 2019 by 320 and 330k bpd respectively. According to the updated estimates the US reached 10M bpd oil production already in the first week of February. This was more than 300k bpd more than a week before. The news triggered intensive selling but from the COT data covering positioning until end of Tuesday trading the reduction of speculative longs wasn’t significant. However the second half of the week probably brought some additional long covering. Technically the H&S pattern on daily WTI crude chart worked perfectly brining 5 dollars per barrel profit for short sellers. WTI closed the week below the psychological $60 level and now markets are eying the weekly inventories and the IEA monthly report (to be released on Tuesday) for more direction.


Corn
The grain sector got support from the drought in Argentina, significant for soybeans and corn while the wheat prices surged on the news of insufficient rains across the Great Plains made winter wheat struggling. Only 14% of Kansas wheat was in good or excellent conditions. For corn the USDA estimates lower production, higher consumption and lower stocks which is a perfect mix of bullish factors, however for the rally to be confirmed some key levels have yet to be broken. Last week the biggest obstacles were technical selling and farmers increased hedging activity. The levels to watch ahead are 365 and 370 for the closest corn contract.


Sugar
The two main Brazilian sugar producers announced last week that they are going to focus on ethanol production as much as possible given the fact that sugar is traded at 30% discount to ethanol. This kind of news usually should give boost to prices however the follow up was completely missing and the raw sugar prices were stuck in a tight range. The huge sugar production from India and the increasing European refined sugar supplies are still weighing on the market of the sweetener. However the huge speculative short positioning limits the space to open additional shorts and the market is currently ahead of the decision which direction to go: back into the broken trend-line or droping toward new lows.


Good Luck and remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016-2018. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com




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