Commodity Wrap - Oil, Platinum, Cocoa, Soybean (14.05.2024)

Oil

• WTI remains in consolidation between 78 and 80 USD per barrel, just over 2 weeks before the OPEC+ meeting.
• A decision to extend the voluntary production cut for Q3 or even for the entire 2024 is likely at the meeting
• Demand prospects seem mixed. On one hand, a slowdown in demand growth in the US and Europe is expected, but on the other hand, very strong growth in Asia continues
• U.S. oil inventories have recently declined, but this was in line with seasonality. The period of sustained inventory decline begins roughly in mid-June and lasts until mid-September. Inventory behaviour in the coming weeks may indicate what to expect from inventories during the summer period
• It is worth noting, however, that the market has lost faith in higher oil prices, as evidenced by the reduction in long positions and the increase in short positions

Net speculative positions are falling below the 1.5-year average. There is a reduction in long positions and an increase in short positions. Source: Bloomberg Finance LP, XTB.

Oil inventories have recently declined, but this is roughly in line with seasonality. Larger declines should start in the second half of June. Furthermore, the DOE intends to purchase oil at a price of 79.99 USD per barrel, meaning that some inventories may be allocated to replenish strategic reserves. Source: Bloomberg

WTI remains in consolidation. Source: xStation5

Platinum

• Platinum price climbed above 1,000 USD per ounce level and is trading at the highest level since June 2023
• The rise in platinum prices is linked to uncertainty surrounding Anglo-American, which is considering spinning off its platinum mining company to facilitate a possible takeover by BHP
• Additionally, the World Platinum Investment Council has raised its deficit expectations for this year to 476,000 ounces. This is a smaller expected deficit than last year but higher than anticipated at the beginning of this year
• It's important to remember that over 50% of platinum consumption comes from industrial sector, primarily in the automotive sector
• Moreover, the price of platinum has almost matched the price of palladium. Historically, platinum has usually been more expensive than palladium

The platinum-to-palladium price ratio is significantly rebounding from the local lows of 2020-2022. When this ratio rebounded from similarly low levels in the past, the price of platinum was up to four times higher than the price of palladium. This occurred during the previous bull market in precious metals. It's worth noting that now, despite high gold and silver prices, the prices of platinum and palladium remain extremely low. Source: Bloomberg Finance LP, XTB

Long positions on platinum have slightly increased, while short positions have slightly decreased. There is especially room for a reduction in short positions, which could lead to an increase in positive positioning in platinum. Net positioning has remained close to the average since 2022. Source: Bloomberg Finance LP, XTB

The price of platinum has strongly rebounded since the end of April and is trading at the highest level since June 2023. The next target for bulls could be the 61.8% retracement of the last major downward wave. Source: xStation5

Cocoa

• Cocoa recently experienced the largest daily increase in history (approximately +15%), followed by the largest daily drop in history (approximately -19%)
• Very low liquidity in the market facilitates extreme price moves
• Cocoa stocks on the exchanges continue to decline, indicating a still tight market. On the other hand, the lack of liquidity in the market makes it difficult to continue the upward movement that has occurred in recent years
• Rabobank indicates that the price peak is already behind us and points to a continued deficit in the market, but smaller than in the 2023/2024 season

Cocoa stocks continue to decline, but this no longer has a significant impact on prices. Source: Bloomberg Finance LP, XTB

We have experienced the largest daily drop in history, which is related to very low market liquidity. Source: Bloomberg Finance LP, XTB

We observe a further decline in both short and long positions on cocoa market. Price behavior indicates a possible "burst" of the bubble and an attempt to adjust to reality, which may mean a decline to the range of 4-6 thousand USD per ton in the coming months. On the other hand, given the current low liquidity, extreme daily movements above 10% cannot be ruled out. Source: Bloomberg Finance LP, XTB

Cocoa maintains significant technical support at the level of 7000 USD and at the 61.8 retracement of the last major upward wave. On the other hand, the upward movement on Tuesday is limited (at the time of the European session), which may indicate a lack of fuel for further growth. If today's low volatility continues, it could signify the actual end of the recent upward correction in a possible new downward trend. Source: xStation5

Soybean

• American soybean processors are concerned that imported edible oil from China will reduce demand for soybeans intended for biofuel production in the US
• There was a threefold increase in imported oil in the US in 2023, which was later used for biofuel production. American processors want to raise the current tariff on processed oil from 15.5%
• Soybean planting is proceeding at a normal pace. There is a slight increase in the inspection of soybeans intended for export
• There is also a significant decrease in short positions on soybeans and an increase in long positions, resulting in a substantial rebound in net positions. However, these remain negative

Positions on soybean contracts are undergoing dramatic changes. If higher tariffs are imposed on Chinese processed oil, American producers may shift to increase production of soybean oil, which is a much more profitable product than raw soybeans or biofuel. Source: Bloomberg Finance LP, XTB

Soybean oil rebounded strongly at the end of the previous week and the beginning of the current week. On the other hand, oil prices are still relatively lower than the price of soybeans. Moreover, soybeans did not continue the recent breakout above 1,230 cents per bushel, which was simultaneously considered the neckline of the double bottom formation. Source: xStation5