energy

  • OPEC+ unofficially agree to 2.2 million barrel per day cut
  • Full compliance with cuts already looks unlikely
  • Brent continues to consolidate near recent lows

Oil prices remain quite volatile but more importantly, not too far from their recent lows after traders judged yesterday’s announcement from OPEC+ with some skepticism.

The lack of an official announcement, with details gradually appearing from individual member states indicated there’s no firm commitment to the 2.2 million barrel per day cut. And Angola insisting straight after it won’t comply further solidified that view.

Saudi Arabia will be hoping that others will, in the main comply, after it committed to extending its one million barrel cut until the end of March, while Russia increased its export reduction from 300,000 to 500,000.

But it seems traders either aren’t buying that members will be compliant or don’t view it as being sufficient. Or, of course, that the lack of formal commitment hints at fracture

Natural Gas News - What Is The Market's Reaction To The Ongoing Russia-Ukraine Conflict?

Natural Gas News - What Is The Market's Reaction To The Ongoing Russia-Ukraine Conflict?

Alex Kuptsikevich Alex Kuptsikevich 01.04.2022 14:46
The energy sector has retreated markedly from its highs in the first days of March but remains a hot topic for markets. Europe’s gas market survived several bouts of fear that it would be without Russian gas. However, we only saw a fourfold increase in value in the first half of the month, followed by stabilisation at high, but not extreme, levels. At the beginning of the last week of March, the price was supported by a fall to EUR 1000 per thousand cubic metres compared to a peak of EUR 3400. This price dynamic clearly showed that the markets did not price for a gas disaster. The current gas payment scheme looks like a nice political compromise. Europe is paying for gas in euros and dollars (as negotiated), and Russia is getting roubles for gas (as it wanted). The net economic effect of such rearrangements is close to zero. Also, these measures are not binding for LNG exports and settlements with Japan. Besides, there is a caveat that a special commission may allow receiving currency in payment for gas. An additional calculation here is that new contracts will always include clauses about alternative payment methods, but they have little effect on the price. Nevertheless, the general upward trend in gas and oil prices is still in place. Spot gas prices in Europe are now six times higher than a year ago and two years ago in March. This does not mean a six-fold increase in prices for final consumers, as most supplies are under long-term contracts. Therefore, what we see in the Dutch TTF prices is nothing more than a struggle between speculators and small buyers in a relatively illiquid market. The NYMEX pricing is much more liquid and representative. Besides, it is pretty far from the conflict. Prices here are up 30% in one month and 130% year to date. Gas was up to $5.6 MMBtu yesterday but 14% below October’s highs near $6.5, making it hard to see market hysteria. Instead, it is just a relatively measured trend. The development of this trend has the potential to return the US gas price to October highs by the end of April due to Europe’s increased interest in non-Russian gas. At the same time, signs that Europe and Russia have managed to formalise some gas purchase terms for themselves are likely to return Dutch’s spot prices to levels near or below EUR 1000.
COT Energy Speculators pullback on #2 Heating Oil bullish bets for 3rd time in 4 weeks

COT Energy Speculators pullback on #2 Heating Oil bullish bets for 3rd time in 4 weeks

Invest Macro Invest Macro 02.04.2022 16:53
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday March 29th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Highlighting the COT energy data is the recent decline in the Heating Oil futures bets. The speculative net position in the Heating Oil futures has dropped for two consecutive weeks and in three out of the past four weeks. The spec crude position has declined by a total of -9,420 contracts over the past four weeks and speculators have now pushed their current net positioning to the lowest level in six weeks. Heating Oil speculator positions are currently (+6,455 contracts) at the lower end of their range after averaging approximately +20,000 contracts each week over the whole of 2021. Heating Oil prices, meanwhile, have seen price surges (hitting multi-year highs) in the past few months due to the Russian invasion of Ukraine but did retrace lower this week with a decline by approximately -8.00 percent for the week at Friday’s close. The energy markets that saw higher speculator bets this week were Natural Gas (11,926 contracts) and the Bloomberg Commodity Index (2,972 contracts). The energy markets that saw lower speculator bets this week were WTI Crude Oil (-21,238 contracts), Heating Oil (-9,228 contracts), Gasoline (-8,168 contracts) and Brent Crude Oil (-554 contracts). Data Snapshot of Commodity Market Traders | Columns Legend Mar-29-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,795,929 1 318,731 0 -360,162 99 41,431 73 Gold 574,521 39 257,596 70 -285,937 30 28,341 45 Silver 147,370 14 48,240 70 -61,372 39 13,132 19 Copper 203,692 29 30,581 64 -37,333 34 6,752 64 Palladium 6,720 1 -2,011 10 1,364 84 647 81 Platinum 61,807 25 14,001 22 -20,754 79 6,753 56 Natural Gas 1,100,690 4 -137,411 37 92,762 60 44,649 92 Brent 188,542 30 -25,220 69 21,609 29 3,611 58 Heating Oil 349,618 31 6,455 52 -32,434 37 25,979 88 Soybeans 755,139 34 206,469 81 -178,764 24 -27,705 24 Corn 1,515,106 24 482,092 92 -424,699 11 -57,393 10 Coffee 227,547 6 38,689 77 -42,092 27 3,403 12 Sugar 819,459 1 161,581 70 -202,758 30 41,177 59 Wheat 341,224 3 13,559 59 -9,435 32 -4,124 91   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week resulted in a net position of 318,731 contracts in the data reported through Tuesday. This was a weekly lowering of -21,238 contracts from the previous week which had a total of 339,969 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 99.4 percent and the small traders (not shown in chart) are Bullish with a score of 73.4 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.4 36.5 4.8 – Percent of Open Interest Shorts: 5.6 56.5 2.5 – Net Position: 318,731 -360,162 41,431 – Gross Longs: 420,097 654,965 85,767 – Gross Shorts: 101,366 1,015,127 44,336 – Long to Short Ratio: 4.1 to 1 0.6 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 0.0 99.4 73.4 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -10.8 12.7 -3.5   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week resulted in a net position of -25,220 contracts in the data reported through Tuesday. This was a weekly decline of -554 contracts from the previous week which had a total of -24,666 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 68.9 percent. The commercials are Bearish with a score of 29.2 percent and the small traders (not shown in chart) are Bullish with a score of 58.1 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.2 44.2 4.4 – Percent of Open Interest Shorts: 33.6 32.7 2.5 – Net Position: -25,220 21,609 3,611 – Gross Longs: 38,169 83,276 8,330 – Gross Shorts: 63,389 61,667 4,719 – Long to Short Ratio: 0.6 to 1 1.4 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 68.9 29.2 58.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.9 -1.1 -5.9   Natural Gas Futures: The Natural Gas Futures large speculator standing this week resulted in a net position of -137,411 contracts in the data reported through Tuesday. This was a weekly gain of 11,926 contracts from the previous week which had a total of -149,337 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 37.3 percent. The commercials are Bullish with a score of 60.1 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 92.0 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.6 42.7 6.2 – Percent of Open Interest Shorts: 35.1 34.3 2.2 – Net Position: -137,411 92,762 44,649 – Gross Longs: 249,135 470,232 68,418 – Gross Shorts: 386,546 377,470 23,769 – Long to Short Ratio: 0.6 to 1 1.2 to 1 2.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 37.3 60.1 92.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.8 -2.3 33.2   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week resulted in a net position of 40,202 contracts in the data reported through Tuesday. This was a weekly decline of -8,168 contracts from the previous week which had a total of 48,370 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 11.0 percent. The commercials are Bullish-Extreme with a score of 89.2 percent and the small traders (not shown in chart) are Bullish with a score of 56.8 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.1 53.0 7.6 – Percent of Open Interest Shorts: 12.0 69.7 4.9 – Net Position: 40,202 -47,775 7,573 – Gross Longs: 74,554 151,056 21,630 – Gross Shorts: 34,352 198,831 14,057 – Long to Short Ratio: 2.2 to 1 0.8 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 11.0 89.2 56.8 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -22.8 25.0 -15.4   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week resulted in a net position of 6,455 contracts in the data reported through Tuesday. This was a weekly fall of -9,228 contracts from the previous week which had a total of 15,683 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.9 percent. The commercials are Bearish with a score of 36.7 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 88.4 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.0 50.8 14.4 – Percent of Open Interest Shorts: 15.1 60.1 6.9 – Net Position: 6,455 -32,434 25,979 – Gross Longs: 59,340 177,626 50,210 – Gross Shorts: 52,885 210,060 24,231 – Long to Short Ratio: 1.1 to 1 0.8 to 1 2.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.9 36.7 88.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.2 -10.3 23.6   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week resulted in a net position of -9,348 contracts in the data reported through Tuesday. This was a weekly gain of 2,972 contracts from the previous week which had a total of -12,320 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 71.7 percent. The commercials are Bearish with a score of 25.7 percent and the small traders (not shown in chart) are Bullish with a score of 52.6 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 70.8 23.8 2.9 – Percent of Open Interest Shorts: 97.2 0.0 0.3 – Net Position: -9,348 8,415 933 – Gross Longs: 25,002 8,415 1,022 – Gross Shorts: 34,350 0 89 – Long to Short Ratio: 0.7 to 1 inf to 1 11.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 71.7 25.7 52.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 29.4 -30.9 11.7   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
Chart of the Week - Gold Miners vs Energy Producers - 20.04.2022

Chart of the Week - Gold Miners vs Energy Producers

Callum Thomas Callum Thomas 20.04.2022 22:05
Gold Miners Left Behind: This curious chart shows the total assets under management in US equity sector ETFs focused on energy (i.e. traditional energy: oil/gas/coal) and gold miners. AUM in energy ETFs has gone up more than 5x since the low point: part of this is clearly price-driven as surging energy prices have triggered better stock price performance and improved financial results. But clearly investors have also had a change of heart on the sector after shunning it for some time (particularly with the rise of ESG investing). To be fair, precious metal prices have been a big fat range trade for most of the past 2 years The standout though in this chart is the one that isn’t standing out: gold mining ETF AUM has by contrast been very sleepy. To be fair, precious metal prices have been a big fat range trade for most of the past 2 years, and at the end of the day when it comes to these commodity equity sectors, commodity prices matter.With gold itself on the cusp of a breakout, this chart begins to look very interesting, and we could easily see a stampede into gold miners if gold itself can manage to break through to new highs. Indeed, with the bull market in equities seemingly in its final throes this could end up appealing to the hoard of retail speculators still searching for their golden ticket…         Key point: Gold miners have been left behind. NOTE: this post first appeared on our NEW Substack: https://topdowncharts.substack.com/Best regards, Callum Thomas Head of Research and Founder of Topdown Charts Follow us on: LinkedIn https://www.linkedin.com/company/topdown-charts Twitter http://www.twitter.com/topdowncharts
COT Soft Commodities Speculators raising bullish bets for Soybean Oil as prices hit record high

COT Soft Commodities Speculators raising bullish bets for Soybean Oil as prices hit record high

Invest Macro Invest Macro 23.04.2022 19:33
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday April 19th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Highlighting the COT soft commodities data is the recent rises in Soybean Oil futures bets. The speculative net position in the Soybean Oil futures has gained for three straight weeks and has increased in eight out of the past ten weeks. Soybean Oil speculator positions have added a total of +39,176 contracts over the past ten weeks as well. This ascent in bullish bets has brought the current overall position to over +100,000 net contracts and to the highest level of the past fifty-six weeks, dating back to March 23rd of 2021. Soybean Oil prices raced to a record high level at over $80 per pound this week and surpassed the previous price peaks of 2008 and 2021. The Soybean Oil prices have had a strong fundamental component driving it higher. The war in Ukraine has created a major disruption in Sunflower Oils (Ukraine and Russia are major suppliers) that has pushed the prices in alternative oils and other soft commodities sharply higher. Reuters news service also cited an Indonesia ban on exports of Palm Oil as having caused an even greater demand for alternative vegetable oils. The dreary outlook for vegetable oil production could mean we see even higher Soybean Oil prices. Overall, the soft commodities that saw higher bets this week were Corn (5,031 contracts), Soybeans (1,803 contracts), Soybean Oil (6,887 contracts), Soybean Meal (6,498 contracts), Live Cattle (2,683 contracts), Lean Hogs (2,231 contracts) and Cotton (1,900 contracts). The soft commodities that saw lower bets this week were Sugar (-349 contracts), Coffee (-6,126 contracts), Cocoa (-2,802 contracts) and Wheat (-641 contracts). Data Snapshot of Commodity Market Traders | Columns Legend Apr-19-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,740,300 0 307,697 1 -351,252 100 43,555 76 Gold 575,202 40 239,757 60 -275,525 37 35,768 66 Silver 170,577 35 46,429 69 -63,288 37 16,859 41 Copper 203,896 29 18,840 56 -28,307 40 9,467 80 Palladium 6,435 0 -2,182 9 1,560 85 622 80 Platinum 61,603 24 7,537 13 -13,812 89 6,275 50 Natural Gas 1,144,047 14 -130,006 40 82,113 57 47,893 100 Brent 191,883 33 -40,102 44 37,663 56 2,439 42 Heating Oil 349,618 31 6,455 52 -32,434 37 25,979 88 Soybeans 762,855 36 200,098 80 -174,873 25 -25,225 28 Corn 1,625,198 42 500,612 94 -456,269 7 -44,343 18 Coffee 209,410 0 41,803 79 -45,447 24 3,644 15 Sugar 909,622 21 239,515 86 -295,470 12 55,955 77 Wheat 337,038 1 23,245 67 -20,425 21 -2,820 98   CORN Futures: The CORN large speculator standing this week equaled a net position of 500,612 contracts in the data reported through Tuesday. This was a weekly lift of 5,031 contracts from the previous week which had a total of 495,581 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 94.0 percent. The commercials are Bearish-Extreme with a score of 6.9 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 17.5 percent. CORN Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.1 45.0 9.4 – Percent of Open Interest Shorts: 5.3 73.1 12.1 – Net Position: 500,612 -456,269 -44,343 – Gross Longs: 586,638 731,004 152,407 – Gross Shorts: 86,026 1,187,273 196,750 – Long to Short Ratio: 6.8 to 1 0.6 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 94.0 6.9 17.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.3 0.1 -1.7   SUGAR Futures: The SUGAR large speculator standing this week equaled a net position of 239,515 contracts in the data reported through Tuesday. This was a weekly decrease of -349 contracts from the previous week which had a total of 239,864 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.8 percent. The commercials are Bearish-Extreme with a score of 12.1 percent and the small traders (not shown in chart) are Bullish with a score of 77.0 percent. SUGAR Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.6 44.2 11.6 – Percent of Open Interest Shorts: 6.3 76.7 5.5 – Net Position: 239,515 -295,470 55,955 – Gross Longs: 296,437 402,400 105,565 – Gross Shorts: 56,922 697,870 49,610 – Long to Short Ratio: 5.2 to 1 0.6 to 1 2.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 85.8 12.1 77.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 18.2 -19.8 20.0   COFFEE Futures: The COFFEE large speculator standing this week equaled a net position of 41,803 contracts in the data reported through Tuesday. This was a weekly fall of -6,126 contracts from the previous week which had a total of 47,929 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 78.5 percent. The commercials are Bearish with a score of 24.5 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.4 percent. COFFEE Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 25.5 53.8 4.7 – Percent of Open Interest Shorts: 5.5 75.5 2.9 – Net Position: 41,803 -45,447 3,644 – Gross Longs: 53,423 112,616 9,760 – Gross Shorts: 11,620 158,063 6,116 – Long to Short Ratio: 4.6 to 1 0.7 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 78.5 24.5 15.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.6 8.4 -2.5   SOYBEANS Futures: The SOYBEANS large speculator standing this week equaled a net position of 200,098 contracts in the data reported through Tuesday. This was a weekly boost of 1,803 contracts from the previous week which had a total of 198,295 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 79.8 percent. The commercials are Bearish with a score of 24.7 percent and the small traders (not shown in chart) are Bearish with a score of 28.4 percent. SOYBEANS Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.8 46.0 7.2 – Percent of Open Interest Shorts: 6.6 69.0 10.5 – Net Position: 200,098 -174,873 -25,225 – Gross Longs: 250,566 351,286 55,231 – Gross Shorts: 50,468 526,159 80,456 – Long to Short Ratio: 5.0 to 1 0.7 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 79.8 24.7 28.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.1 3.4 3.6   SOYBEAN OIL Futures: The SOYBEAN OIL large speculator standing this week equaled a net position of 105,211 contracts in the data reported through Tuesday. This was a weekly lift of 6,887 contracts from the previous week which had a total of 98,324 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 80.6 percent. The commercials are Bearish-Extreme with a score of 16.1 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 96.2 percent. SOYBEAN OIL Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.5 44.2 10.5 – Percent of Open Interest Shorts: 4.8 76.5 4.9 – Net Position: 105,211 -127,399 22,188 – Gross Longs: 124,302 174,162 41,383 – Gross Shorts: 19,091 301,561 19,195 – Long to Short Ratio: 6.5 to 1 0.6 to 1 2.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 80.6 16.1 96.2 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.3 -9.5 20.0   SOYBEAN MEAL Futures: The SOYBEAN MEAL large speculator standing this week equaled a net position of 122,756 contracts in the data reported through Tuesday. This was a weekly boost of 6,498 contracts from the previous week which had a total of 116,258 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 95.8 percent. The commercials are Bearish-Extreme with a score of 2.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 99.0 percent. SOYBEAN MEAL Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 33.5 42.4 13.1 – Percent of Open Interest Shorts: 3.1 80.7 5.2 – Net Position: 122,756 -154,801 32,045 – Gross Longs: 135,397 171,107 52,874 – Gross Shorts: 12,641 325,908 20,829 – Long to Short Ratio: 10.7 to 1 0.5 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 95.8 2.4 99.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.6 -2.2 13.0   LIVE CATTLE Futures: The LIVE CATTLE large speculator standing this week equaled a net position of 54,525 contracts in the data reported through Tuesday. This was a weekly lift of 2,683 contracts from the previous week which had a total of 51,842 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.5 percent. The commercials are Bullish with a score of 67.0 percent and the small traders (not shown in chart) are Bullish with a score of 56.0 percent. LIVE CATTLE Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 37.6 39.8 10.1 – Percent of Open Interest Shorts: 19.8 54.8 12.9 – Net Position: 54,525 -45,886 -8,639 – Gross Longs: 115,285 122,065 30,955 – Gross Shorts: 60,760 167,951 39,594 – Long to Short Ratio: 1.9 to 1 0.7 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 29.5 67.0 56.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 11.6 -12.0 -5.7   LEAN HOGS Futures: The LEAN HOGS large speculator standing this week equaled a net position of 43,002 contracts in the data reported through Tuesday. This was a weekly increase of 2,231 contracts from the previous week which had a total of 40,771 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.6 percent. The commercials are Bearish with a score of 48.2 percent and the small traders (not shown in chart) are Bullish with a score of 69.8 percent. LEAN HOGS Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.4 34.4 10.7 – Percent of Open Interest Shorts: 17.6 51.1 12.7 – Net Position: 43,002 -38,275 -4,727 – Gross Longs: 83,133 78,601 24,424 – Gross Shorts: 40,131 116,876 29,151 – Long to Short Ratio: 2.1 to 1 0.7 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.6 48.2 69.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.3 6.1 16.7   COTTON Futures: The COTTON large speculator standing this week equaled a net position of 85,120 contracts in the data reported through Tuesday. This was a weekly gain of 1,900 contracts from the previous week which had a total of 83,220 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 76.9 percent. The commercials are Bearish with a score of 20.6 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 94.6 percent. COTTON Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 46.6 35.0 9.4 – Percent of Open Interest Shorts: 6.0 81.8 3.1 – Net Position: 85,120 -98,107 12,987 – Gross Longs: 97,613 73,296 19,582 – Gross Shorts: 12,493 171,403 6,595 – Long to Short Ratio: 7.8 to 1 0.4 to 1 3.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 76.9 20.6 94.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.1 -1.0 20.9   COCOA Futures: The COCOA large speculator standing this week equaled a net position of 36,357 contracts in the data reported through Tuesday. This was a weekly reduction of -2,802 contracts from the previous week which had a total of 39,159 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.3 percent. The commercials are Bearish with a score of 44.0 percent and the small traders (not shown in chart) are Bullish with a score of 65.1 percent. COCOA Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.5 45.6 6.3 – Percent of Open Interest Shorts: 16.4 63.5 3.5 – Net Position: 36,357 -43,099 6,742 – Gross Longs: 75,822 109,538 15,230 – Gross Shorts: 39,465 152,637 8,488 – Long to Short Ratio: 1.9 to 1 0.7 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.3 44.0 65.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.5 -2.9 -34.9   WHEAT Futures: The WHEAT large speculator standing this week equaled a net position of 23,245 contracts in the data reported through Tuesday. This was a weekly fall of -641 contracts from the previous week which had a total of 23,886 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 66.8 percent. The commercials are Bearish with a score of 21.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 98.1 percent. WHEAT Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.0 37.6 9.5 – Percent of Open Interest Shorts: 29.1 43.7 10.4 – Net Position: 23,245 -20,425 -2,820 – Gross Longs: 121,339 126,766 32,116 – Gross Shorts: 98,094 147,191 34,936 – Long to Short Ratio: 1.2 to 1 0.9 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 66.8 21.0 98.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 9.0 -14.5 22.9   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
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COT Futures: This Week’s Energy Charts

Invest Macro Invest Macro 15.05.2022 14:57
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 10th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. The energy markets with higher speculator bets this week were Natural Gas (5,177 contracts) and the Bloomberg Commodity Index (91 contracts). The markets with declining speculator bets this week were WTI Crude Oil (-10,898 contracts), Brent Crude Oil (-3,897 contracts), Heating Oil (-9,228 contracts) and Gasoline (-7,003 contracts). Data Snapshot of Commodity Market Traders | Columns Legend May-10-2022OIOI-IndexSpec-NetSpec-IndexCom-NetCOM-IndexSmalls-NetSmalls-Index WTI Crude 1,736,594 0 310,803 2 -354,479 98 43,676 77 Gold 571,447 34 193,315 40 -227,756 57 34,441 57 Silver 142,752 9 19,082 41 -30,519 69 11,437 9 Copper 184,502 15 -22,626 26 19,249 73 3,377 45 Palladium 8,832 11 -3,245 3 3,434 96 -189 33 Platinum 66,064 32 1,363 5 -5,373 98 4,010 18 Natural Gas 1,108,451 6 -112,529 45 64,006 51 48,523 100 Brent 173,911 19 -31,215 59 30,562 44 653 18 Heating Oil 349,618 31 6,455 52 -32,434 37 25,979 88 Soybeans 694,454 20 174,608 72 -147,698 33 -26,910 26 Corn 1,510,783 23 470,908 90 -415,345 13 -55,563 11 Coffee 212,659 5 32,555 69 -33,559 37 1,004 0 Sugar 797,453 0 187,185 75 -220,611 26 33,426 49 Wheat 308,326 0 21,686 48 -17,779 34 -3,907 92   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week equaled a net position of 310,803 contracts in the data reported through Tuesday. This was a weekly fall of -10,898 contracts from the previous week which had a total of 321,701 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.1 percent. The commercials are Bullish-Extreme with a score of 98.5 percent and the small traders (not shown in chart) are Bullish with a score of 76.6 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.9 35.4 5.2 – Percent of Open Interest Shorts: 6.0 55.8 2.7 – Net Position: 310,803 -354,479 43,676 – Gross Longs: 415,170 614,716 90,689 – Gross Shorts: 104,367 969,195 47,013 – Long to Short Ratio: 4.0 to 1 0.6 to 1 1.9 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 2.1 98.5 76.6 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -2.8 2.2 3.2   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week equaled a net position of -31,215 contracts in the data reported through Tuesday. This was a weekly fall of -3,897 contracts from the previous week which had a total of -27,318 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 58.8 percent. The commercials are Bearish with a score of 44.1 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.0 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 19.2 48.1 5.0 – Percent of Open Interest Shorts: 37.2 30.5 4.6 – Net Position: -31,215 30,562 653 – Gross Longs: 33,423 83,639 8,698 – Gross Shorts: 64,638 53,077 8,045 – Long to Short Ratio: 0.5 to 1 1.6 to 1 1.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 58.8 44.1 18.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -10.1 14.9 -40.0   Natural Gas Futures: The Natural Gas Futures large speculator standing this week equaled a net position of -112,529 contracts in the data reported through Tuesday. This was a weekly boost of 5,177 contracts from the previous week which had a total of -117,706 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.8 percent. The commercials are Bullish with a score of 51.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 21.1 37.9 6.6 – Percent of Open Interest Shorts: 31.3 32.2 2.2 – Net Position: -112,529 64,006 48,523 – Gross Longs: 234,306 420,582 73,144 – Gross Shorts: 346,835 356,576 24,621 – Long to Short Ratio: 0.7 to 1 1.2 to 1 3.0 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 44.8 51.0 100.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 7.5 -9.1 9.6   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week equaled a net position of 31,378 contracts in the data reported through Tuesday. This was a weekly decline of -7,003 contracts from the previous week which had a total of 38,381 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.1 percent. The commercials are Bullish-Extreme with a score of 93.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 97.3 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.6 50.9 8.3 – Percent of Open Interest Shorts: 14.2 65.6 4.0 – Net Position: 31,378 -44,072 12,694 – Gross Longs: 73,929 152,809 24,799 – Gross Shorts: 42,551 196,881 12,105 – Long to Short Ratio: 1.7 to 1 0.8 to 1 2.0 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 2.1 93.0 97.3 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -9.0 3.7 34.1   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week equaled a net position of 6,455 contracts in the data reported through Tuesday. This was a weekly lowering of -9,228 contracts from the previous week which had a total of 15,683 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.9 percent. The commercials are Bearish with a score of 36.7 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 88.4 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.0 50.8 14.4 – Percent of Open Interest Shorts: 15.1 60.1 6.9 – Net Position: 6,455 -32,434 25,979 – Gross Longs: 59,340 177,626 50,210 – Gross Shorts: 52,885 210,060 24,231 – Long to Short Ratio: 1.1 to 1 0.8 to 1 2.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 51.9 36.7 88.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 4.2 -10.3 23.6   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week equaled a net position of -13,263 contracts in the data reported through Tuesday. This was a weekly lift of 91 contracts from the previous week which had a total of -13,354 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 56.8 percent. The commercials are Bearish with a score of 41.9 percent and the small traders (not shown in chart) are Bearish with a score of 41.5 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 57.7 36.7 2.0 – Percent of Open Interest Shorts: 96.2 0.0 0.2 – Net Position: -13,263 12,644 619 – Gross Longs: 19,888 12,644 703 – Gross Shorts: 33,151 0 84 – Long to Short Ratio: 0.6 to 1 inf to 1 8.4 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 56.8 41.9 41.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -15.0 16.3 -11.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
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The Commodities Feed: Another week passes with no EU ban | ING Economics

ING Economics ING Economics 20.05.2022 08:36
Your daily roundup of commodities news and ING views Tank farm for storage of petroleum products in Volgograd, Russia Energy It appears that another week will pass with the EU still unable to agree on a Russian oil ban. While it is taking longer than expected to come to an agreement, we believe that member states will eventually come to a deal. How much of an impact this will have on the market will depend on how watered down the final agreement is relative to the proposal. The effectiveness of the ban will also depend on the actions of countries outside the EU. Bloomberg reports that China is looking to potentially buy Russian crude for its strategic reserves. Although this shouldn’t come as too much of a surprise if China is set to increase its share of Russian oil purchases. The significant discounts available for Russian crude will prove very tempting for some buyers, like China and India. Self-sanctioning will already be affecting Russian oil flows to the EU, even in the absence of an official oil ban. This has left the EU to look elsewhere for alternative supplies, and whilst the US is an obvious candidate (given the expectation of relatively strong supply growth), we could in fact see US crude exports coming under pressure given the narrowing that we have seen in the WTI/Brent discount. The July WTI/Brent discount narrowed to less than US$2/bbl at one stage this week, after starting the month at more than a US$4/bbl discount. Inventories continue to point towards a tightening of the refined products market in Europe. The latest data from Insights Global show that gasoil inventories in the ARA region fell by 31kt over the week to 1.55kt, leaving inventories at multi-year lows. However, the big move over the week was in European gasoline inventories. Gasoline stocks in ARA fell by 342kt to 1.05mt. This decline over the week has seen gasoline inventories fall from more than a 5-year high to just below the 5-year average. Singapore also saw a further tightening in light distillate stocks over the week, with inventory levels declining by 815Mbbls to 13.74MMbbls, leaving them hovering just above the 5-year average. Clearly, the tightness that we are seeing in the US gasoline market is spreading into other regions. And given that the driving season is still ahead of us, we would expect to see further declines in inventories, which should prove supportive for gasoline prices over the summer. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM European gas prices came under pressure yesterday. TTF fell by more than 3.7%, which saw the market settling at its lowest levels since the start of the war. European gas storage continues to improve due to strong LNG inflows. Storage in Europe is almost 41% full at the moment compared to a 5-year average of around 44% for this stage of the year. The gap between current inventories and the 5-year average continues to narrow. Assuming we go through injection season with no significant disruption to Russian gas flows, Europe should enter the next heating season with a comfortable inventory. However, this is a big assumption, and the risk of disruption is likely to continue to keep the market trading at historically high levels. US natural gas prices also came under pressure yesterday, selling off almost 2.7%. Weekly storage data shows that US gas storage increased by 89Bcf over the week, which was slightly higher than the 5-year average of 87Bcf. Agriculture The latest data from the Indian Sugar Mills Association shows that sugar production in India has increased to around 34.9mt so far this season. The association reported that around 116 sugar mills were still operating as of 15 May. ISMA maintained its export estimate at around 9mt for the current year, with around 8.5mt of export sales already made. The food ministry reported that sugar exports have increased to around 7.5mt as of 18th May, already surpassing last year’s 7.2mt of exports. The ministry estimates that around 3.5mt of sugar equivalent would be diverted to ethanol this year and expects this to grow with targets of around 6mt by 2025. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Read this article on THINK TagsSugar Russian oil ban Natural gas Gasoline shortage Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Follow FXMAG.COM on Google News
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Green Energy Stocks To Dominate Markets In The Near Future? | America's growing bioenergy market needs clearer monitoring and more innovation | ING Economics

ING Economics ING Economics 20.05.2022 00:00
Bioenergy is a crucial pathway to net-zero emissions by 2050. The bioenergy market in the US has been growing and diversifying, with strong growth potential seen in carbon capture and storage (CCS), renewable diesel, and renewable natural gas. Addressing the environmental impact of bioenergy needs clear monitoring and more innovative solutions Bioenergy is a form of renewable energy derived from organic material   Bioenergy, a form of renewable energy derived from organic materials (or biomass), will play a pivotal role in helping the world achieve net-zero emissions by 2050. With a wide range of application options in sectors such as transport, heating, and electricity, bioenergy is forecast to account for 19% of total energy supply in 2050 and will contribute to 13% of the emissions reduction between 2020 and 2030 under the International Energy Agency's (IEA) Net-Zero Emissions (NZE) scenario. Emissions reductions by mitigation measure in the Net-Zero Emissions scenario, 2020-50 Source: International Energy Agency   In the US, the development of bioenergy has been accelerating and expanding. In the transport sector, the US is home to the world’s largest biofuels market, and the demand for biofuels in North America is expected to grow more than any other region through 2026 under the IEA’s baseline scenario. Growth will continue to be led by a diversification of biofuels supply beyond conventional ethanol, as advanced biofuels like renewable diesel and renewable natural gas (RNG) keep gaining momentum. Sustainable aviation fuels (SAFs) are another point of growth; these will be covered in a later article. Biofuel demand growth by region in the baseline scenario, 2021-2026 Source: International Energy Agency   But the deployment of and investment in bioenergy is rising in other sectors as well, led by mounting action from corporates and investors across sectors to decarbonise their businesses and portfolios. So, let's take a look at the growth prospects of various bioenergy applications in the US, as well as the challenges they face.   Examples of bioenergy-related corporate climate strategies: Oil and gas: ExxonMobil identifies biofuels as one of its core solutions for its net-zero ambition. The company announced in early 2022 that it would acquire a 49.9% stake in Biojet AS, a Norwegian biofuels company, to receive up to three million barrels of biofuels per year. ExxonMobil is also investing $125m in California-based Global Clean Energy to purchase up to five million barrels per year of renewable diesel. Petrochemicals: Dow sees the creation of a circular economy through recycling and using bio-based materials as a focus area to accelerate sustainability. The company is expanding an agreement with Fuenix Ecogy Group to ramp up circular plastics production. It has also signed agreements with Gunvor Petroleum Rotterdam and Texas-based New Hope Energy to purify pyrolysis oil feedstocks derived from plastic waste. Power: Southern Company last year took ownership of the Meadow Branch Landfill Methane Recovery Facility, the renewable natural gas facility located in Tennessee, to strengthen its RNG capacity as part of the company’s strategy to achieve net-zero emissions by 2050. Biofuels: Federal policies will have a net positive effect on US production this year The main federal policy to support the US biofuels market is the renewable fuel standard (RFS), which requires refiners to blend certain volumes of biofuels in gasoline each year. The RFS benefited biofuels production – especially that of fuel ethanol – in the past, although in recent years the RFS has become more susceptible to policy uncertainty. The Environmental Protection Agency (EPA), which is in charge of setting RFS mandates, last December proposed to retroactively lower biofuel mandates for 2020 and 2021 but set 2022 requirements slightly above pre-pandemic levels. This will put pressure on refiners to blend more biofuel into their gasoline production this year, resulting in a net positive impact on the biofuels industry. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM In addition, the EPA has proposed the rejection of all outstanding small refinery exemption (SREs) waivers pending for the 2016-20 compliance years. SREs give small refiners that process less than 75,000 barrels per day (bpd) of oil and can demonstrate economic hardship caused by the RFS an exemption from complying with the rules. If implemented, this decision would substantially raise the demand for biofuel credits. A federal policy that will specifically boost the production of ethanol is the Biden administration's plan to allow E15 gasoline, a fuel that uses a 15% ethanol blend, to be sold between June and September. E15 gasoline is typically banned in summer due to worries about air pollution. E15 consumption is low also because of retail availability, automobile compatibility, and safety concerns. But heightened oil prices amid the Russia-Ukraine war have made the case for more E15 gasoline sales to ease prices. State level policies are a powerful addition At the state level, California’s low-carbon fuel standard (LCFS), the backbone of a carbon intensity-based cap-and-trade system, has been playing a substantial role in incentivising biofuels production in and near the state. The LCFS aims to achieve a 20% reduction in the carbon intensity of California’s transportation fuel pool by 2030, with compliance standards set for each year. Carbon intensity (CIs) based on composite of gasoline and diesel fuels under the LCFS Source: California Air Resources Board   Since last year, LCFS credits (supply) generated from low-carbon fuels have increasingly outgrown LCFS deficits (demand), which has led to a 23% fall from the record high LCFS price of $206/metric ton to $158/metric ton in March 2022. This is mainly because the demand for gasoline and LCFS credits has not recovered from the pandemic, whereas the production of low-carbon fuels keeps growing steadily. The biggest driver of recent LCFS credit generation is renewable diesel, followed by electricity, which has been boosted by the continuing adoption of electric vehicles. LCFS total credits and deficits for all fuels reported Note: Cumulative bank refers to total number of banked credits Source: California Air Resources Board LCFS credit generation by fuel type *Hydrogen, Renewable Naphtha, Propane, Innovative Crude & Low Complexity/Low Energy Use Refining, etc.. Note: Project based credits are issued post verification and may not be included. Source: California Air Resources Board   It remains to be seen whether this deficit trend will be temporary or permanent; we also don't know how the expected implementation of similar programmes in adjacent jurisdictions will alter the LCFS system in California. In addition to the Clean Fuels Program in Oregon which is already in place, Washington State is expecting to implement its Clean Fuel Standard in 2023 and a federal fuel standard is set to come into force in Canada in the same year.  Other US states including New Mexico, Colorado, Minnesota, and states in the Northeast and Midwest are also in various stages of developing LCFS-style systems. These programmes will provide effective additions to the federal RFS programme in driving biofuels demand. Renewable diesel takes the lead in advanced biofuel deployment The production of biomass-based diesel – namely biodiesel and renewable diesel – has taken off in the US and is set to increase further. Of the two, biodiesel dominates the bio-based diesel market, but renewable diesel is seeing faster growth. This is partly because renewable diesel is compatible with existing distribution infrastructure and engines. With the same composition as fossil diesel, renewable diesel does not have a blending limit, whereas biodiesel typically accounts for up to 20% of fossil diesel in the US, because of insufficient regulatory incentives despite higher blends being available. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM Renewable diesel’s ability to lower carbon intensity, particularly in trucking and aviation, has prompted several US refineries to invest in greenfield projects and/or convert traditional plants to process renewable diesel. Refineries set to complete conversion between 2022-23 include Marathon Petroleum’s Martinez refinery in California, CVR Energy’s Wynnewood refinery in Oklahoma, and HollyFrontier’s Cheyenne plant in Wyoming, etc. Planned renewable diesel capacity in the US is expected to reach 6bn gallons by 2025, up from less than 2.4bn gallons estimated for 2021. One major challenge to the growth of both biodiesel and renewable diesel is feedstock availability and costs. It is estimated by Bloomberg New Energy Finance (BNEF) that the demand for bio-based diesel feedstock will more than double from 2020 to 38.3bn pounds (17.4bn kilograms) in 2022, and soar to over 64bn pounds (19bn kilograms) in 2024. Prices for bio-based diesel feedstock have also climbed since 2020, causing some companies to postpone their renewable diesel projects. US estimated bio-based diesel feedstock use and implied future demand from capacity additions Source: Bloomberg New Energy Finance   In the long term, despite the growth momentum for bio-based diesel, the Energy Information Administration forecasts that bio-based diesel will remain a small part of the diesel market, accounting for less than 8% of US diesel production in 2050. This is partially due to competition from food consumption and electric vehicles (EVs), which will be discussed in a later section. Nevertheless, that 8% still translates into roughly 0.23mn bpd of production, a considerable absolute amount. RNG to see demand build up in the power sector Another promising advanced biofuel which is set for growth is renewable natural gas (RNG), or biogas that has been upgraded to replace fossil gas. RNG production capacity in the US increased at a compound annual rate of 35% between 2017 and 2021, thanks to $1.7bn of investment from oil and gas companies. Looking forward, RNG demand is projected to jump from 0.2 trillion cubic feet (Tcf) today to between 2.3 and 3.2 Tcf in 2040, according to BNEF. The fuel is forecast to be capable of displacing 6-12% of the US natural gas demand. RNG can be produced from various sources. Landfill has the strongest supply and cost advantage – most landfill RNG projects can be economical at $10/MMBtu or lower; landfill accounts for more than 60% of the RNG credits generated under the RFS and more than 90% of the RNG credits under the LCFS. In contrast, RNG produced from manure is more costly – at $30/MMBtu or higher – but remains attractive under the LCFS as it offers one of the lowest carbon intensities of less than -300 gCO2e/MJ. Importantly, although RNG demand from transportation dominates now, the majority of demand for RNG by 2040 will come from the power sector. In California, where the LCFS is advanced, RNG already contributes to 98% of natural gas used for transportation, mostly in municipal buses and trucking. The can add risks to future project returns if the produced RNG cannot be contracted in time. There is a potential in the long term for more RNG to be used in shipping, though it will encounter competition from other biofuels or synthetic fuels. RNG producers are starting to pivot their focus away from the transport sector. Archaea Energy is aiming to sell its RNG to natural gas utilities through long-term offtake agreements. The company plans to allocate 65% of its RNG production to non-transport applications. Admittedly, electricity generation from RNG today is more expensive than from conventional gas and the contribution of RNG to the grid is limited. Yet demand is likely to be sustained in the future, driven by climate commitments from commercial/residential customers and precuring requirements set for utilities. California now mandates utility company SoCalGas to increase RNG’s share of gas deliveries from 4% in 2021 to 12.5% by 2030. ­Oregon passed legislation to allow RNG to account for 30% of a utility’s purchases by 2045; the state is also letting utilities recover prudently incurred costs to meet the target. A handful of other states are considering similar policies. Outlook for US renewable natural gas demand Source: Bloomberg New Energy Finance   The favourable outlook for RNG/biogas can also augment the production of bio-fertilisers, which can be generated from the waste from biogas production. This will help meet the rising demand for bio-fertilisers in the US, spurred by growing preferences for organic food, as well as concerns over the likely harmful effects of chemical fertilisers on both health and the environment. US to pioneer in BECCS development The US is poised to lead the deployment of bioenergy with carbon capture and storage (BECCS) technology, a high-potential application of bioenergy. BECCS involves converting biomass to heat, electricity, or liquid fuels while capturing and storing the CO2 that is emitted during the conversion process. Since the growing of plant biomass absorbs CO2, BECCS can achieve net negative emissions when the emitted CO2 from bioenergy generation is permanently stored. Indeed, the UN's Intergovernmental Panel on Climate Change highlighted in its most recent report the need for carbon removal technologies for the world to reach net-zero emissions. The US is already a front-runner in CCS – it is home to 36 of the 71 new CCS projects added worldwide during the first nine months of 2021. On top of this, several BECCS networks are emerging in the Midwest thanks to lower costs of bioethanol production. Summit Carbon Solutions, for instance, is progressing with a project to link more than 30 ethanol biorefineries across Iowa, Minnesota, Nebraska, North Dakota, and South Dakota. With a total potential capturing capacity of 8 Mtpa, the network would be the largest of its kind globally. Valero Energy and BlackRock are partnering with Navigator Energy Services to develop an industrial-scale CCS network that would connect biorefineries and other industrial plants across five Midwest states. The challenges facing bioenergy The use of bioenergy is not without controversy. The main challenge is the negative impact of bioenergy generation from excessive land use. From an environmental point of view, growing feedstocks such as soybeans and corn can lead to more deforestation, degradation of soil, and harmful changes to ecosystems. From a social point of view, despite yield growth potentials, the more feedstock is used for biofuels, the less there will be for food production. This has been exacerbated by the Russia-Ukraine war, which has disrupted the global food supply chain as both countries are major exporters of several leading crops. Hence, concerns have arisen in the US that the increasing use of crops for biofuels will limit food supply and add pressure to food prices. To tackle the problem in the long term, there needs to be a switch away from conventional, food-based biofuel feedstocks to advanced biofuels which use non-food crops, municipal solid waste, and agricultural and forest residues. The IEA forests that 60% of the global bioenergy supply in 2050 will need to come from sources that do not need dedicated land use to achieve net-zero emissions. Accelerating advanced biofuel production requires stronger incentives compared to those for conventional biofuels. In the US, the federal Biomass Crop Assistance Program provides financial assistance to producers of advanced biofuel feedstock. The Biden administration has also included in its FY23 budget $245m to accelerate the R&D of next-generation biofuel technologies. Another challenge is that the traditional use of bioenergy (burning wood or traditional charcoal) remains controversial as it can cause more emissions and deforestation. The EU still categorises bioenergy as green in its Taxonomy, but has strengthened the criteria to exclude certain forms of wooden biomass from qualifying as “renewable”. In the US, the EPA sees bioenergy as a cleaner fuel, while also recognising its negative potential if not managed well. Moreover, bioenergy-based solutions face scepticism that the supply chain – which involves biomass growing, transportation, storage, and processing – can emit more CO2 and harm the environment. That is why more precise monitoring and reporting of life-cycle emissions along a bioenergy technology’s supply chain needs to be in place. Finally, competing low-carbon technologies can complicate the growth of bioenergy. In the transport sector, the massive adoption of EVs will be a major threat to the demand for biofuels. As mentioned above, RNG developers are expanding their business footprint to the power sector, though these developers will likely encounter competition from renewable energy. Nonetheless, biofuels are still likely to maintain their niche in transportation, especially in heavy-duty trucks and aeroplanes, as it will be challenging for EVs to provide long-haul services without a step-change in technology. Global bioenergy supply in the Net-Zero by 2050 Scenario, 2010-50 Source: International Energy Agency Read this article on THINK TagsUnited States Renewables Net zero Energy Transition Biofuels Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Follow FXMAG.COM on Google News
Commodities Update: Strong Russian Oil Flows to China and Volatility in European Gas Market

COT Charts: Speculator positions were mixed in Energy this week

Invest Macro Invest Macro 22.05.2022 12:21
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 17th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Energy market speculator bets were mixed this week as three out of the six energy markets we cover had higher positioning this week. Overall, the energy markets with higher speculator bets this week were WTI Crude Oil (14,834 contracts), Gasoline (2,420 contracts) and the Bloomberg Commodity Index (3,624 contracts). The markets with declining speculator bets this week were Brent Crude Oil (-3,652 contracts), Natural Gas (-2,483 contracts) and Heating Oil (-9,228 contracts). Data Snapshot of Commodity Market Traders | Columns Legend May-17-2022OIOI-IndexSpec-NetSpec-IndexCom-NetCOM-IndexSmalls-NetSmalls-Index WTI Crude 1,730,665 0 325,637 7 -363,869 95 38,232 69 Gold 555,756 30 175,360 33 -206,879 65 31,519 48 Silver 144,534 11 16,114 38 -24,841 75 8,727 0 Copper 189,483 19 -24,408 25 23,059 75 1,349 33 Palladium 9,114 13 -3,215 3 3,621 97 -406 20 Platinum 65,926 32 2,203 7 -6,697 96 4,494 25 Natural Gas 1,118,417 8 -115,012 44 64,340 51 50,672 100 Brent 176,861 21 -34,867 53 32,127 47 2,740 46 Heating Oil 349,618 31 6,455 52 -32,434 37 25,979 88 Soybeans 709,144 24 183,647 73 -156,937 33 -26,710 26 Corn 1,548,438 29 473,743 91 -424,756 11 -48,987 15 Coffee 206,106 0 38,487 72 -40,949 32 2,462 13 Sugar 825,281 6 196,630 77 -245,374 22 48,744 68 Wheat 326,651 8 28,806 57 -26,020 23 -2,786 98   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week totaled a net position of 325,637 contracts in the data reported through Tuesday. This was a weekly advance of 14,834 contracts from the previous week which had a total of 310,803 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 7.3 percent. The commercials are Bullish-Extreme with a score of 94.9 percent and the small traders (not shown in chart) are Bullish with a score of 68.9 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.0 35.3 5.1 – Percent of Open Interest Shorts: 5.2 56.3 2.9 – Net Position: 325,637 -363,869 38,232 – Gross Longs: 416,190 611,264 88,406 – Gross Shorts: 90,553 975,133 50,174 – Long to Short Ratio: 4.6 to 1 0.6 to 1 1.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 7.3 94.9 68.9 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 6.0 -3.3 -12.1   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week totaled a net position of -34,867 contracts in the data reported through Tuesday. This was a weekly reduction of -3,652 contracts from the previous week which had a total of -31,215 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 52.7 percent. The commercials are Bearish with a score of 46.7 percent and the small traders (not shown in chart) are Bearish with a score of 46.3 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.7 50.8 4.7 – Percent of Open Interest Shorts: 35.4 32.7 3.1 – Net Position: -34,867 32,127 2,740 – Gross Longs: 27,757 89,898 8,270 – Gross Shorts: 62,624 57,771 5,530 – Long to Short Ratio: 0.4 to 1 1.6 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 52.7 46.7 46.3 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -8.7 9.3 -5.9   Natural Gas Futures: The Natural Gas Futures large speculator standing this week totaled a net position of -115,012 contracts in the data reported through Tuesday. This was a weekly lowering of -2,483 contracts from the previous week which had a total of -112,529 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.1 percent. The commercials are Bullish with a score of 51.1 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.7 37.5 6.8 – Percent of Open Interest Shorts: 31.0 31.7 2.2 – Net Position: -115,012 64,340 50,672 – Gross Longs: 231,576 419,033 75,523 – Gross Shorts: 346,588 354,693 24,851 – Long to Short Ratio: 0.7 to 1 1.2 to 1 3.0 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 44.1 51.1 100.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 6.5 -9.0 15.8   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week totaled a net position of 33,798 contracts in the data reported through Tuesday. This was a weekly increase of 2,420 contracts from the previous week which had a total of 31,378 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 4.5 percent. The commercials are Bullish-Extreme with a score of 90.3 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 99.1 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.6 52.8 7.9 – Percent of Open Interest Shorts: 13.6 68.0 3.7 – Net Position: 33,798 -46,770 12,972 – Gross Longs: 75,744 162,371 24,256 – Gross Shorts: 41,946 209,141 11,284 – Long to Short Ratio: 1.8 to 1 0.8 to 1 2.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 4.5 90.3 99.1 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -9.3 3.3 39.2   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week totaled a net position of 6,455 contracts in the data reported through Tuesday. This was a weekly decline of -9,228 contracts from the previous week which had a total of 15,683 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.9 percent. The commercials are Bearish with a score of 36.7 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 88.4 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.0 50.8 14.4 – Percent of Open Interest Shorts: 15.1 60.1 6.9 – Net Position: 6,455 -32,434 25,979 – Gross Longs: 59,340 177,626 50,210 – Gross Shorts: 52,885 210,060 24,231 – Long to Short Ratio: 1.1 to 1 0.8 to 1 2.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 51.9 36.7 88.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 4.2 -10.3 23.6   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week totaled a net position of -9,639 contracts in the data reported through Tuesday. This was a weekly advance of 3,624 contracts from the previous week which had a total of -13,263 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 70.6 percent. The commercials are Bearish with a score of 27.9 percent and the small traders (not shown in chart) are Bearish with a score of 42.1 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 67.2 25.2 2.0 – Percent of Open Interest Shorts: 94.1 0.0 0.2 – Net Position: -9,639 9,002 637 – Gross Longs: 24,050 9,002 715 – Gross Shorts: 33,689 0 78 – Long to Short Ratio: 0.7 to 1 inf to 1 9.2 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 70.6 27.9 42.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -2.9 3.1 -1.8   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
COT Week 21 Charts: Energy Speculator Positions Mixed

COT Week 21 Charts: Energy Speculator Positions Mixed

Invest Macro Invest Macro 28.05.2022 19:32
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 24th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Energy market speculator bets were mixed this week as three out of the six energy markets we cover had higher positioning this week while three markets had lower contracts. Leading the gains for energy was WTI Crude Oil (9,124 contracts) and Natural Gas (3,442 contracts) with the Bloomberg Commodity Index (126 contracts) also showing a positive week. Meanwhile, leading the declines in speculator bets this week were Heating Oil (-9,228 contracts) and Brent Crude Oil (-4,422 contracts) with Gasoline (-1,373 contracts) also registering lower bets on the week. Speculator strength standings for each Commodity where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength Data Snapshot of Commodity Market Traders | Columns Legend May-24-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,711,863 0 334,761 11 -374,627 91 39,866 71 Gold 530,098 22 183,813 14 -211,947 82 28,134 37 Silver 146,456 13 14,103 26 -23,297 88 9,194 3 Copper 186,433 17 -19,633 28 19,288 73 345 27 Palladium 7,919 7 -3,472 2 3,800 98 -328 25 Platinum 65,824 32 1,485 5 -6,683 96 5,198 34 Natural Gas 1,107,496 6 -111,570 45 63,847 51 47,723 93 Brent 183,629 27 -39,289 45 37,488 56 1,801 34 Heating Oil 349,618 31 6,455 52 -32,434 37 25,979 88 Soybeans 729,900 28 188,368 72 -159,047 34 -29,321 21 Corn 1,544,885 29 427,848 85 -372,522 19 -55,326 11 Coffee 211,266 5 37,072 71 -38,484 34 1,412 4 Sugar 847,420 11 209,487 80 -255,450 20 45,963 65 Wheat 326,607 8 26,344 53 -24,339 25 -2,005 100   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week was a net position of 334,761 contracts in the data reported through Tuesday. This was a weekly increase of 9,124 contracts from the previous week which had a total of 325,637 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.5 percent. The commercials are Bullish-Extreme with a score of 90.7 percent and the small traders (not shown in chart) are Bullish with a score of 71.2 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.7 34.1 5.0 – Percent of Open Interest Shorts: 5.1 56.0 2.7 – Net Position: 334,761 -374,627 39,866 – Gross Longs: 422,541 584,496 86,091 – Gross Shorts: 87,780 959,123 46,225 – Long to Short Ratio: 4.8 to 1 0.6 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 10.5 90.7 71.2 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 10.5 -9.3 -8.4   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week was a net position of -39,289 contracts in the data reported through Tuesday. This was a weekly decline of -4,422 contracts from the previous week which had a total of -34,867 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.2 percent. The commercials are Bullish with a score of 55.6 percent and the small traders (not shown in chart) are Bearish with a score of 33.6 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 14.8 52.6 3.7 – Percent of Open Interest Shorts: 36.2 32.2 2.7 – Net Position: -39,289 37,488 1,801 – Gross Longs: 27,144 96,551 6,828 – Gross Shorts: 66,433 59,063 5,027 – Long to Short Ratio: 0.4 to 1 1.6 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 45.2 55.6 33.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.0 5.9 -7.9   Natural Gas Futures: The Natural Gas Futures large speculator standing this week was a net position of -111,570 contracts in the data reported through Tuesday. This was a weekly gain of 3,442 contracts from the previous week which had a total of -115,012 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.1 percent. The commercials are Bullish with a score of 51.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 93.0 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.8 37.4 6.7 – Percent of Open Interest Shorts: 30.9 31.6 2.4 – Net Position: -111,570 63,847 47,723 – Gross Longs: 230,219 413,701 74,555 – Gross Shorts: 341,789 349,854 26,832 – Long to Short Ratio: 0.7 to 1 1.2 to 1 2.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 45.1 51.0 93.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.8 -8.4 0.9   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week was a net position of 32,425 contracts in the data reported through Tuesday. This was a weekly decrease of -1,373 contracts from the previous week which had a total of 33,798 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 3.1 percent. The commercials are Bullish-Extreme with a score of 93.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 87.1 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.4 55.0 7.6 – Percent of Open Interest Shorts: 12.9 69.1 4.0 – Net Position: 32,425 -43,599 11,174 – Gross Longs: 72,517 170,888 23,596 – Gross Shorts: 40,092 214,487 12,422 – Long to Short Ratio: 1.8 to 1 0.8 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 3.1 93.4 87.1 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.1 6.6 16.3   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week was a net position of 6,455 contracts in the data reported through Tuesday. This was a weekly lowering of -9,228 contracts from the previous week which had a total of 15,683 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.9 percent. The commercials are Bearish with a score of 36.7 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 88.4 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.0 50.8 14.4 – Percent of Open Interest Shorts: 15.1 60.1 6.9 – Net Position: 6,455 -32,434 25,979 – Gross Longs: 59,340 177,626 50,210 – Gross Shorts: 52,885 210,060 24,231 – Long to Short Ratio: 1.1 to 1 0.8 to 1 2.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.9 36.7 88.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.2 -10.3 23.6   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week was a net position of -9,513 contracts in the data reported through Tuesday. This was a weekly gain of 126 contracts from the previous week which had a total of -9,639 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 71.1 percent. The commercials are Bearish with a score of 27.9 percent and the small traders (not shown in chart) are Bearish with a score of 37.4 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 65.8 26.2 1.8 – Percent of Open Interest Shorts: 93.5 0.0 0.4 – Net Position: -9,513 9,010 503 – Gross Longs: 22,645 9,010 636 – Gross Shorts: 32,158 0 133 – Long to Short Ratio: 0.7 to 1 inf to 1 4.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 71.1 27.9 37.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.8 3.4 -5.5   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
COT Week 22 Charts: Energy Speculator Positions Mixed led by Heating Oil, Gasoline

COT Week 22 Charts: Energy Speculator Positions Mixed led by Heating Oil, Gasoline

Invest Macro Invest Macro 04.06.2022 21:33
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 31st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Energy market speculator bets were mixed this week as three out of the six energy markets we cover had higher positioning this week while three markets also had lower contracts. Leading the gains for energy were Heating Oil (6,319 contracts), Gasoline (1,265 contracts) and Natural Gas (1,202 contracts). Meanwhile, leading the declines in speculator bets this week were WTI Crude Oil (-1,785 contracts) and Brent Crude Oil (-1,583 contracts) with Bloomberg Commodity Index (-1,048 contracts) also registering lower bets on the week. Strength scores (3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the Bloomberg Commodity Index is above its midpoint for the past 3 years while all the other markets are below the 50 percent level. Strength score trends (or move index, that show 6-week changes in strength scores) shows that heating oil, natural gas and WTI crude have had rising scores over the past six weeks. Data Snapshot of Commodity Market Traders | Columns Legend May-31-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,787,928 9 332,976 10 -373,761 91 40,785 72 Gold 513,722 18 172,589 5 -200,056 95 27,467 32 Silver 147,301 14 13,997 15 -23,861 99 9,864 6 Copper 189,923 19 -18,025 29 15,425 70 2,600 40 Palladium 6,538 1 -3,133 4 3,221 95 -88 39 Platinum 67,964 35 2,363 7 -6,501 96 4,138 20 Natural Gas 1,115,815 7 -110,368 45 59,679 50 50,689 100 Brent 181,699 25 -40,872 43 38,941 58 1,931 35 Heating Oil 248,966 15 121 43 -17,967 52 17,846 60 Soybeans 753,373 34 186,078 71 -158,757 34 -27,321 25 Corn 1,564,217 32 404,200 82 -353,348 22 -50,852 14 Coffee 214,170 8 43,015 76 -45,757 28 2,742 17 Sugar 848,463 11 201,680 78 -240,752 23 39,072 56 Wheat 331,136 11 22,309 48 -18,647 33 -3,662 91   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week recorded a net position of 332,976 contracts in the data reported through Tuesday. This was a weekly fall of -1,785 contracts from the previous week which had a total of 334,761 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 9.9 percent. The commercials are Bullish-Extreme with a score of 91.0 percent and the small traders (not shown in chart) are Bullish with a score of 72.5 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.6 34.8 5.0 – Percent of Open Interest Shorts: 5.0 55.7 2.7 – Net Position: 332,976 -373,761 40,785 – Gross Longs: 421,683 622,867 89,200 – Gross Shorts: 88,707 996,628 48,415 – Long to Short Ratio: 4.8 to 1 0.6 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 9.9 91.0 72.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 8.9 -8.7 -3.9   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week recorded a net position of -40,872 contracts in the data reported through Tuesday. This was a weekly lowering of -1,583 contracts from the previous week which had a total of -39,289 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 42.6 percent. The commercials are Bullish with a score of 58.0 percent and the small traders (not shown in chart) are Bearish with a score of 35.3 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 14.7 54.0 4.2 – Percent of Open Interest Shorts: 37.2 32.6 3.2 – Net Position: -40,872 38,941 1,931 – Gross Longs: 26,712 98,147 7,700 – Gross Shorts: 67,584 59,206 5,769 – Long to Short Ratio: 0.4 to 1 1.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 42.6 58.0 35.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.3 2.1 -6.9   Natural Gas Futures: The Natural Gas Futures large speculator standing this week recorded a net position of -110,368 contracts in the data reported through Tuesday. This was a weekly gain of 1,202 contracts from the previous week which had a total of -111,570 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.5 percent. The commercials are Bearish with a score of 49.6 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.5 37.4 6.8 – Percent of Open Interest Shorts: 30.4 32.0 2.3 – Net Position: -110,368 59,679 50,689 – Gross Longs: 228,487 417,276 75,815 – Gross Shorts: 338,855 357,597 25,126 – Long to Short Ratio: 0.7 to 1 1.2 to 1 3.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 45.5 49.6 100.0 – Strength Index Reading (3 Year Range): Bearish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.9 -7.1 6.6   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week recorded a net position of 33,690 contracts in the data reported through Tuesday. This was a weekly advance of 1,265 contracts from the previous week which had a total of 32,425 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 4.4 percent. The commercials are Bullish-Extreme with a score of 91.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 94.9 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.7 53.9 7.7 – Percent of Open Interest Shorts: 13.8 68.9 3.7 – Net Position: 33,690 -46,032 12,342 – Gross Longs: 76,089 165,784 23,735 – Gross Shorts: 42,399 211,816 11,393 – Long to Short Ratio: 1.8 to 1 0.8 to 1 2.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 4.4 91.0 94.9 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.0 4.9 26.7   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week recorded a net position of 121 contracts in the data reported through Tuesday. This was a weekly advance of 6,319 contracts from the previous week which had a total of -6,198 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 42.6 percent. The commercials are Bullish with a score of 52.1 percent and the small traders (not shown in chart) are Bullish with a score of 60.2 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.4 49.7 16.7 – Percent of Open Interest Shorts: 17.4 56.9 9.5 – Net Position: 121 -17,967 17,846 – Gross Longs: 43,360 123,782 41,618 – Gross Shorts: 43,239 141,749 23,772 – Long to Short Ratio: 1.0 to 1 0.9 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 42.6 52.1 60.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.5 -7.4 -7.8   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week recorded a net position of -10,561 contracts in the data reported through Tuesday. This was a weekly reduction of -1,048 contracts from the previous week which had a total of -9,513 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 67.1 percent. The commercials are Bearish with a score of 31.9 percent and the small traders (not shown in chart) are Bearish with a score of 38.5 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 63.6 28.5 1.9 – Percent of Open Interest Shorts: 93.7 0.0 0.4 – Net Position: -10,561 10,027 534 – Gross Longs: 22,382 10,027 679 – Gross Shorts: 32,943 0 145 – Long to Short Ratio: 0.7 to 1 inf to 1 4.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 67.1 31.9 38.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -6.8 7.7 -7.6   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
COT Week 23 Charts: Energy Speculator Positions Mixed led by Brent Crude & Heating Oil

COT Week 23 Charts: Energy Speculator Positions Mixed led by Brent Crude & Heating Oil

Invest Macro Invest Macro 12.06.2022 15:16
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday June 7th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Energy market speculator bets were mixed this week as three out of the six energy markets we cover had higher positioning this week while three markets had lower contracts. Leading the gains for energy markets was Brent Crude Oil (4,774 contracts) and Heating Oil (4,765 contracts) with Bloomberg Commodity Index (2,178 contracts) also showing a positive week. Meanwhile, leading the declines in speculator bets this week were WTI Crude Oil (-4,720 contracts) and Natural Gas (-3,974 contracts) with Gasoline (-3,202 contracts) also registering lower bets on the week. Strength scores (3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the Bloomberg Commodity Index is the highest above its midpoint for the past 3 years while Brent, Heating Oil and Natural Gas are slightly below the 50 percent level. Strength score trends (or move index, that show 6-week changes in strength scores) shows that Heating Oil and the Bloomberg Commodity Index bets have been rising the strongest over the past six weeks while Gasoline is moving the opposite way. Data Snapshot of Commodity Market Traders | Columns Legend Jun-07-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,790,618 10 328,256 8 -369,033 93 40,777 72 Gold 494,130 12 175,268 7 -199,886 95 24,618 18 Silver 148,294 15 17,404 5 -27,990 94 10,586 10 Copper 194,187 22 -3,714 40 879 60 2,835 42 Palladium 7,035 3 -3,461 2 3,581 97 -120 37 Platinum 65,295 31 5,933 12 -9,742 92 3,809 15 Natural Gas 1,127,731 10 -114,342 44 66,419 52 47,923 93 Brent 169,802 16 -36,098 51 34,208 50 1,890 35 Heating Oil 261,651 20 4,886 50 -24,428 45 19,542 66 Soybeans 760,444 35 176,644 68 -148,390 39 -28,254 23 Corn 1,557,167 31 391,264 80 -337,137 24 -54,127 12 Coffee 222,583 15 48,767 81 -51,363 23 2,596 16 Sugar 849,814 12 195,403 77 -234,496 24 39,093 56 Wheat 333,705 12 23,881 50 -19,863 31 -4,018 90   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week recorded a net position of 328,256 contracts in the data reported through Tuesday. This was a weekly decrease of -4,720 contracts from the previous week which had a total of 332,976 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 8.2 percent. The commercials are Bullish-Extreme with a score of 92.9 percent and the small traders (not shown in chart) are Bullish with a score of 72.5 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.7 34.8 5.2 – Percent of Open Interest Shorts: 5.3 55.4 2.9 – Net Position: 328,256 -369,033 40,777 – Gross Longs: 423,882 622,320 92,501 – Gross Shorts: 95,626 991,353 51,724 – Long to Short Ratio: 4.4 to 1 0.6 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 8.2 92.9 72.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.3 -4.2 -2.1   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week recorded a net position of -36,098 contracts in the data reported through Tuesday. This was a weekly increase of 4,774 contracts from the previous week which had a total of -40,872 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.6 percent. The commercials are Bullish with a score of 50.2 percent and the small traders (not shown in chart) are Bearish with a score of 34.8 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.3 51.5 4.4 – Percent of Open Interest Shorts: 36.6 31.4 3.3 – Net Position: -36,098 34,208 1,890 – Gross Longs: 26,009 87,488 7,434 – Gross Shorts: 62,107 53,280 5,544 – Long to Short Ratio: 0.4 to 1 1.6 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.6 50.2 34.8 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.1 -2.3 -14.1   Natural Gas Futures: The Natural Gas Futures large speculator standing this week recorded a net position of -114,342 contracts in the data reported through Tuesday. This was a weekly decrease of -3,974 contracts from the previous week which had a total of -110,368 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.3 percent. The commercials are Bullish with a score of 51.8 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 93.5 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.8 37.2 6.8 – Percent of Open Interest Shorts: 31.0 31.3 2.6 – Net Position: -114,342 66,419 47,923 – Gross Longs: 235,073 419,847 76,779 – Gross Shorts: 349,415 353,428 28,856 – Long to Short Ratio: 0.7 to 1 1.2 to 1 2.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 44.3 51.8 93.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.9 -1.6 4.6   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week recorded a net position of 30,488 contracts in the data reported through Tuesday. This was a weekly decrease of -3,202 contracts from the previous week which had a total of 33,690 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 1.2 percent. The commercials are Bullish-Extreme with a score of 95.2 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 88.5 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.6 52.7 8.0 – Percent of Open Interest Shorts: 14.7 66.2 4.3 – Net Position: 30,488 -41,866 11,378 – Gross Longs: 75,841 162,330 24,623 – Gross Shorts: 45,353 204,196 13,245 – Long to Short Ratio: 1.7 to 1 0.8 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 1.2 95.2 88.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -8.9 6.4 16.0   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week recorded a net position of 4,886 contracts in the data reported through Tuesday. This was a weekly rise of 4,765 contracts from the previous week which had a total of 121 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.6 percent. The commercials are Bearish with a score of 45.3 percent and the small traders (not shown in chart) are Bullish with a score of 66.1 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.3 49.5 17.5 – Percent of Open Interest Shorts: 15.4 58.9 10.1 – Net Position: 4,886 -24,428 19,542 – Gross Longs: 45,231 129,588 45,902 – Gross Shorts: 40,345 154,016 26,360 – Long to Short Ratio: 1.1 to 1 0.8 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 49.6 45.3 66.1 – Strength Index Reading (3 Year Range): Bearish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 17.2 -9.7 -9.1   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week recorded a net position of -8,383 contracts in the data reported through Tuesday. This was a weekly increase of 2,178 contracts from the previous week which had a total of -10,561 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 75.4 percent. The commercials are Bearish with a score of 23.5 percent and the small traders (not shown in chart) are Bearish with a score of 37.9 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 33.5 62.0 1.5 – Percent of Open Interest Shorts: 45.0 51.3 0.8 – Net Position: -8,383 7,865 518 – Gross Longs: 24,512 45,368 1,126 – Gross Shorts: 32,895 37,503 608 – Long to Short Ratio: 0.7 to 1 1.2 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 75.4 23.5 37.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 10.8 -10.2 -6.8   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview – Week 23 2022

The Swing Overview – Week 23 2022

Purple Trading Purple Trading 17.06.2022 08:53
The Swing Overview - Week 23 Major global stock indices broke through their support levels after several days of range movement in response to the tightening economy, the ongoing war in Ukraine, slowing economic growth and high inflation. The Reserve Bank of Australia raised its interest rate by 0.50%. The ECB decided to start raising interest rates by 0.25% from July 2022. The winner of last week is the US dollar, which continues to strengthen. Macroeconomic data Data from the US labour market was highly anticipated. The job creation indicator, the so-called NFP, surprised the markets positively. Analysts expected that 325,000 new jobs had been created in May. In fact, 390 thousand jobs were created in the US. Unemployment is at 3.6%. The information on the growth of hourly wages, which is a leading indicator of inflation, was important. Average hourly earnings rose 0.3% in May, less than analysts who expected 0.4%.   Unemployment claims reached 229,000 this week. This is the highest levels since 3/3/2022. However, this is not an extreme increase. The number of claims is still in the pre-pandemic average area. Nevertheless, it can be seen that since 7/4/2022, when the number of applications reached 166 thousand, the number of applications is slowly increasing and this indicator will be closely monitored.  The ISM index of purchasing managers in the US service sector reached 55.9 in May. This is lower than the previous month's reading of 57.1. A value above 50 still points to expansion in the sector although the decline in the reading indicates  economy.   The yield on the US 10-year bond is close to its peak and is currently around 3%. The rise in yields has been followed by a rise in the US dollar. The dollar index has surpassed 103. The reason for the strengthening of the dollar is the aggressive tightening of the economy by the US Fed, which began reducing the central bank's balance sheet on June 1, 2022. In practice, this means that the Fed will let expire the government bonds it previously bought as part of QE and will not reinvest them further. The first tranche of bonds will expire on June 15, so the effect of this operation remains to be seen. Figure 1: The US 10-year bond yields and USD index on the daily chart   The SP 500 Index The SP 500 index has been moving in a narrow range for the past few days between 4,200, where resistance is and 4,080, where support has been tested several times. This support was broken and has become the new resistance as we can see on the H4 chart.   Figure 2: The SP 500 on H4 and D1 chart   The catalyst for this strong initiation move is the strong US dollar and rising bond yields. Therefore, the current resistance is in the 4,075 - 4,085 range.  The nearest support is 3,965 - 3,970 according to the H4 chart. The next support is 3,879 - 3,907.   German DAX index Macroeconomic data that affected the DAX was manufacturing orders for April, which fell 2.7% month-on-month, while analysts were expecting a 0.3% rise. Industrial production in Germany rose by 0.7% in April (expectations were for 1.0%). The war in Ukraine has a strong impact on the weaker figures. The catalyst for breaking support was the ECB's decision to raise interest rates, which the bank will start implementing from July 2022. Figure 3: German DAX index on H4 and daily chart The DAX is below the SMA 100 moving average according to the daily and H4 chart. This shows a bearish sentiment. The nearest resistance is 14,300 - 14,335. Support is at 13,870 - 13,900 according to the H4 chart.   The ECB left the interest rate unchanged  The ECB left interest rates unchanged on June 9, 2022, so the key rate is still at 0.0%. However, the bank said that it will proceed with a rate hike from July, when the rate is expected to rise by 0.25%. The next hike will then be in September, probably again by 0.25%. The bank pointed to the high inflation rate, which is expected to reach 6.8% for 2022. Inflation is expected to fall to 3.4% in 2023 and 2.1% in 2024.  Figure 4: The EUR/USD on H4 and daily chart According to the bank, a significant risk is Russia's unjustified aggression against Ukraine, which is causing problems in supply chains and pushing energy and some commodity prices up. The result is a slowdown in the growth of the European economy. The bank also announced that it will end its asset purchase program as of July 1, 2022. This is the soft end of this program, as the money that will flow from matured assets will continue to be reinvested by the bank. In practice, this means that the ECB's balance sheet will not be further inflated, but for now, unlike the Fed’s balance sheet, the bank has no plans to reduce its balance sheet. This, coupled with the more moderate rate hike plans and the existence of the above risks, has supported the dollar and the euro has begun to weaken sharply in response to the ECB announcement. The resistance is 1.0760-1.0770. Current support at 1.063-1.064 is broken and it will become new resistance if the break is confirmed. The next support according to the H4 chart is 1.0530 - 1.0550.   Australian central bank surprises with aggressive approach In Australia, the central bank raised its policy rate by 0.50%. Analysts had expected the bank to raise the rate by 0.25%. Thus, the current rate on the Australian dollar is 0.80%. However, this aggressive increase did not strengthen the Australian dollar, which surprisingly weakened. The reason for this is the strong US dollar and also the risk off sentiment that is taking place in the equity indices.  Also impacting the Aussie is the situation in China, where there is zero tolerance of COVID-19. This will impact the country's economic growth, which is very likely to fall short of the 5.5% that was originally projected.  Figure 5: The AUD/USD on H4 and daily chart According to the H4 chart, the AUD/USD currency pair has broken below the SMA 100 moving average, which is a bearish signal. The nearest resistance is 0.7140 - 0.7150. The support is in the zone 0.7030 - 0.7040. 
COT Week 24 Charts: Energy Speculator Positions Mixed led by Heating Oil & WTI Crude

COT Week 24 Charts: Energy Speculator Positions Mixed led by Heating Oil & WTI Crude

Invest Macro Invest Macro 18.06.2022 13:18
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday June 14th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Energy market speculator bets were mixed this week as three out of the six energy markets we cover had higher positioning this week while three markets had lower contracts. Leading the gains for energy markets was Heating Oil (3,589 contracts) and then Gasoline (968 contracts) with the Bloomberg Commodity Index (72 contracts) also showing a positive week. Meanwhile, on the downside, the markets leading the declines in speculator bets this week were WTI Crude Oil (-25,310 contracts) and Natural Gas (-9,143 contracts) while Brent Crude Oil (-291 contracts) also registered lower bets on the week. Strength scores (3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the Bloomberg Commodity Index has the highest strength score with a 75.7 strength score followed by Heating Oil and Brent Crude Oil. WTI Crude Oil (currently at the lowest level of past three years or 0 percent) and Gasoline (2.2 percent) currently are in bearish-extreme levels with speculator sentiment very weak. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that Heating Oil and the Bloomberg Commodity Index have had rising scores over the past six weeks while all the other energy markets have had declining moves. Data Snapshot of Commodity Market Traders | Columns Legend Jun-14-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,715,674 0 302,946 0 -341,654 100 38,708 70 Gold 497,456 13 154,598 0 -178,569 100 23,971 15 Silver 151,978 18 14,005 0 -22,047 100 8,042 0 Copper 187,247 17 -13,797 32 10,287 67 3,510 46 Palladium 7,740 6 -4,057 0 4,354 100 -297 27 Platinum 66,613 33 2,214 7 -6,793 96 4,579 26 Natural Gas 1,053,265 0 -123,485 42 74,310 54 49,175 96 Brent 171,026 17 -36,389 50 34,601 51 1,788 33 Heating Oil 268,199 23 8,475 55 -28,686 41 20,211 68 Soybeans 754,428 34 182,667 70 -155,663 37 -27,004 25 Corn 1,521,565 25 399,775 81 -344,196 23 -55,579 11 Coffee 202,656 0 46,885 79 -48,399 25 1,514 5 Sugar 800,806 1 170,483 72 -198,006 31 27,523 42 Wheat 336,890 13 20,435 46 -18,089 34 -2,346 98   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week totaled a net position of 302,946 contracts in the data reported through Tuesday. This was a weekly reduction of -25,310 contracts from the previous week which had a total of 328,256 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bullish with a score of 69.6 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.9 35.3 5.3 – Percent of Open Interest Shorts: 6.2 55.2 3.0 – Net Position: 302,946 -341,654 38,708 – Gross Longs: 409,427 604,944 90,476 – Gross Shorts: 106,481 946,598 51,768 – Long to Short Ratio: 3.8 to 1 0.6 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 0.0 100.0 69.6 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -6.5 9.2 -8.2   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week totaled a net position of -36,389 contracts in the data reported through Tuesday. This was a weekly fall of -291 contracts from the previous week which had a total of -36,098 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.1 percent. The commercials are Bullish with a score of 50.8 percent and the small traders (not shown in chart) are Bearish with a score of 33.4 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 13.6 52.0 4.3 – Percent of Open Interest Shorts: 34.9 31.8 3.3 – Net Position: -36,389 34,601 1,788 – Gross Longs: 23,246 88,924 7,365 – Gross Shorts: 59,635 54,323 5,577 – Long to Short Ratio: 0.4 to 1 1.6 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.1 50.8 33.4 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -15.2 14.3 6.5   Natural Gas Futures: The Natural Gas Futures large speculator standing this week totaled a net position of -123,485 contracts in the data reported through Tuesday. This was a weekly reduction of -9,143 contracts from the previous week which had a total of -114,342 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 41.5 percent. The commercials are Bullish with a score of 54.3 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 96.4 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.9 38.9 7.1 – Percent of Open Interest Shorts: 32.6 31.8 2.4 – Net Position: -123,485 74,310 49,175 – Gross Longs: 220,256 409,613 74,311 – Gross Shorts: 343,741 335,303 25,136 – Long to Short Ratio: 0.6 to 1 1.2 to 1 3.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 41.5 54.3 96.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.7 0.5 10.2   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week totaled a net position of 31,456 contracts in the data reported through Tuesday. This was a weekly increase of 968 contracts from the previous week which had a total of 30,488 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.2 percent. The commercials are Bullish-Extreme with a score of 93.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 94.1 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.8 53.2 8.2 – Percent of Open Interest Shorts: 14.7 67.4 4.2 – Net Position: 31,456 -43,672 12,216 – Gross Longs: 76,744 164,469 25,175 – Gross Shorts: 45,288 208,141 12,959 – Long to Short Ratio: 1.7 to 1 0.8 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 2.2 93.4 94.1 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.0 5.3 10.7   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week totaled a net position of 8,475 contracts in the data reported through Tuesday. This was a weekly lift of 3,589 contracts from the previous week which had a total of 4,886 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.9 percent. The commercials are Bearish with a score of 40.7 percent and the small traders (not shown in chart) are Bullish with a score of 68.4 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.1 50.5 16.8 – Percent of Open Interest Shorts: 14.0 61.2 9.2 – Net Position: 8,475 -28,686 20,211 – Gross Longs: 45,945 135,386 45,006 – Gross Shorts: 37,470 164,072 24,795 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 54.9 40.7 68.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 24.5 -15.6 -6.8   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week totaled a net position of -8,311 contracts in the data reported through Tuesday. This was a weekly gain of 72 contracts from the previous week which had a total of -8,383 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 75.7 percent. The commercials are Bearish with a score of 23.2 percent and the small traders (not shown in chart) are Bearish with a score of 38.9 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.0 51.7 0.7 – Percent of Open Interest Shorts: 38.5 42.8 0.1 – Net Position: -8,311 7,764 547 – Gross Longs: 25,428 45,267 619 – Gross Shorts: 33,739 37,503 72 – Long to Short Ratio: 0.8 to 1 1.2 to 1 8.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 75.7 23.2 38.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 19.3 -18.9 -5.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
COT Week 25 Charts: Energy Speculator bets on defensive led by WTI Crude Oil & Natural Gas

COT Week 25 Charts: Energy Speculator bets on defensive led by WTI Crude Oil & Natural Gas

Invest Macro Invest Macro 25.06.2022 14:35
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday June 21st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Energy markets speculator bets were lower on the week as just two out of the six energy markets we cover had higher positioning this week while four markets had lower contracts. Leading the gains for energy markets was Heating Oil (1,089 contracts) with the Bloomberg Commodity Index (259 contracts) also showing a small positive week. Meanwhile, leading the declines in speculator bets this week was WTI Crude Oil (-13,444 contracts) with Natural Gas (-7,384 contracts), Brent Crude Oil (-1,621 contracts) and Gasoline (-49 contracts) also registering lower bets on the week. Strength scores (3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the Bloomberg Commodity Index and the Heating Oil are both in bullish levels at the moment. All other energy markets are below the midpoint of the past 3-years and have bearish or extreme bearish readings. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that the Bloomberg Commodity Index and the Heating Oil are again leading the six week trends with 19.9 percent and 20.8 percent, respectively. Brent Oil leads the downside trends with -11.4 percent over the past six weeks.   Data Snapshot of Commodity Market Traders | Columns Legend Jun-21-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,658,636 0 289,502 0 -323,915 100 34,413 64 Gold 500,276 14 163,287 4 -186,929 96 23,642 14 Silver 145,356 12 18,419 7 -27,250 93 8,831 4 Copper 187,170 17 -20,938 27 18,928 72 2,010 37 Palladium 7,641 6 -4,046 0 4,511 100 -465 17 Platinum 64,946 30 1,491 6 -6,397 96 4,906 30 Natural Gas 1,030,971 0 -130,869 39 85,977 58 44,892 86 Brent 173,098 18 -38,010 47 36,052 53 1,958 36 Heating Oil 268,818 23 9,564 56 -28,204 41 18,640 63 Soybeans 745,494 32 178,379 68 -152,968 38 -25,411 28 Corn 1,512,152 23 380,169 79 -326,474 25 -53,695 12 Coffee 192,832 0 49,371 81 -52,348 22 2,977 20 Sugar 779,773 0 163,111 70 -181,280 34 18,169 30 Wheat 320,326 6 19,067 44 -15,407 38 -3,660 91   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week was a net position of 289,502 contracts in the data reported through Tuesday. This was a weekly decline of -13,444 contracts from the previous week which had a total of 302,946 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bullish with a score of 63.5 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.4 35.9 5.2 – Percent of Open Interest Shorts: 6.0 55.4 3.2 – Net Position: 289,502 -323,915 34,413 – Gross Longs: 388,496 594,860 86,668 – Gross Shorts: 98,994 918,775 52,255 – Long to Short Ratio: 3.9 to 1 0.6 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 0.0 100.0 63.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.1 10.7 -13.1   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week was a net position of -38,010 contracts in the data reported through Tuesday. This was a weekly decline of -1,621 contracts from the previous week which had a total of -36,389 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.4 percent. The commercials are Bullish with a score of 53.2 percent and the small traders (not shown in chart) are Bearish with a score of 35.7 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.2 51.5 4.0 – Percent of Open Interest Shorts: 37.1 30.7 2.8 – Net Position: -38,010 36,052 1,958 – Gross Longs: 26,225 89,195 6,865 – Gross Shorts: 64,235 53,143 4,907 – Long to Short Ratio: 0.4 to 1 1.7 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 47.4 53.2 35.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -11.4 9.1 17.7   Natural Gas Futures: The Natural Gas Futures large speculator standing this week was a net position of -130,869 contracts in the data reported through Tuesday. This was a weekly lowering of -7,384 contracts from the previous week which had a total of -123,485 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.3 percent. The commercials are Bullish with a score of 58.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 86.3 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.7 39.8 7.0 – Percent of Open Interest Shorts: 33.4 31.5 2.7 – Net Position: -130,869 85,977 44,892 – Gross Longs: 213,487 410,457 72,315 – Gross Shorts: 344,356 324,480 27,423 – Long to Short Ratio: 0.6 to 1 1.3 to 1 2.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 39.3 58.0 86.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.5 7.0 -8.6   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week was a net position of 31,407 contracts in the data reported through Tuesday. This was a weekly lowering of -49 contracts from the previous week which had a total of 31,456 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.1 percent. The commercials are Bullish-Extreme with a score of 95.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 83.8 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 25.3 54.3 7.8 – Percent of Open Interest Shorts: 14.8 68.3 4.3 – Net Position: 31,407 -42,080 10,673 – Gross Longs: 75,835 162,816 23,491 – Gross Shorts: 44,428 204,896 12,818 – Long to Short Ratio: 1.7 to 1 0.8 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 2.1 95.0 83.8 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.0 2.0 -13.5   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week was a net position of 9,564 contracts in the data reported through Tuesday. This was a weekly lift of 1,089 contracts from the previous week which had a total of 8,475 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 56.5 percent. The commercials are Bearish with a score of 41.2 percent and the small traders (not shown in chart) are Bullish with a score of 62.9 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.1 51.0 16.7 – Percent of Open Interest Shorts: 13.5 61.5 9.8 – Net Position: 9,564 -28,204 18,640 – Gross Longs: 45,955 137,166 44,894 – Gross Shorts: 36,391 165,370 26,254 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 56.5 41.2 62.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 20.8 -12.7 -7.7   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week was a net position of -8,052 contracts in the data reported through Tuesday. This was a weekly boost of 259 contracts from the previous week which had a total of -8,311 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 76.7 percent. The commercials are Bearish with a score of 23.2 percent and the small traders (not shown in chart) are Bearish with a score of 29.7 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.8 69.5 0.7 – Percent of Open Interest Shorts: 39.1 57.5 0.2 – Net Position: -8,052 7,764 288 – Gross Longs: 17,434 45,267 447 – Gross Shorts: 25,486 37,503 159 – Long to Short Ratio: 0.7 to 1 1.2 to 1 2.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 76.7 23.2 29.7 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 19.9 -18.8 -11.7   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview – Week 25 2022

The Swing Overview – Week 25 2022

Purple Trading Purple Trading 27.06.2022 13:52
The Swing Overview – Week 25 There was a rather quiet week in which the major world stock indices shook off previous losses and have been slowly rising since Monday. However, this is probably only a temporary correction of the current bearish trend.  The CNB Bank Board met for the last time in its old composition and raised the interest rate to 7%, the highest level since 1999. However, the koruna barely reacted to this increase. The reason is that the main risks are still in place and fear of a recession keeps the markets in a risk-off sentiment that benefits the US dollar. Macroeconomic data We had a bit of a quiet week when it comes to macroeconomic data in the US. Industrial production data was reported, which grew by 0.2% month-on-month in May, which is less than the growth seen in April, when production grew by 1.4%. While the growth is slower than expected, it is still growth, which is a positive thing.   In terms of labor market data, the number of jobless claims held steady last week, reaching 229k. Thus, compared to the previous week, the number of claims fell by 2 thousand.   The US Dollar took a break in this quiet week and came down from its peak which is at 106, 86. Overall, however, the dollar is still in an uptrend. The US 10-year bond yields also fell last week and are currently hovering around 3%. The fall in bond yields was then a positive boost for equity indices. Figure 1: US 10-year bond yields and USD index on the daily chart   The SP 500 Index The SP 500 index has been gaining since Monday, June 20, 2022. However, this is probably not a signal of a major bullish reversal. Fundamental reasons still rather speak for a weakening and so it could be a short-term correction of the current bearish trend. The rise is probably caused by long-term investors who were buying the dip. Next week the US will report the GDP data which could be the catalyst for further movement.  Figure 2: The SP 500 on H4 and D1 chart   The index has currently reached the resistance level according to the H4 chart, which is in the region of 3,820 - 3,836. The next strong resistance is then in the area of 3,870 - 3,900 where the previous support was broken and turned into the resistance. The current nearest support is 3 640 - 3 670.    German DAX index The manufacturing PMI for June came in at 52.0. The previous month's PMI was 54.8. While a value above 50 indicates an expected expansion, it must be said that the PMI has essentially been declining since February 2022. This, together with other data coming out of Germany, suggests a certain pessimism, which is also reflected in the DAX index. Figure 3: German DAX index on H4 and daily chart The DAX broke support according to the H4 chart at 12,950 - 12,980 but then broke back above that level, so we don't have a valid breakout. Overall, however, the DAX is in a downtrend and the technical analysis does not show a stronger sign of a reversal of this trend yet. The nearest resistance according to the H4 chart is 13,130 - 13,190. The next resistance is then at 13 420 - 13 440. Strong support according to the daily chart is 12,443 - 12,600.   Eurozone inflation at a new record Consumer inflation in the Eurozone for May rose by 8.1% year-on-year as expected by analysts. On a month-on-month basis, inflation added 0.8% compared to April. The rise in inflation could support the ECB's decision to raise rates possibly by more than the 0.25% expected so far, which is expected to happen at the July meeting.  Figure 4: EUR/USD on H4 and daily chart From a technical perspective, the euro has bounced off support on the pair with the US dollar according to the daily chart, which is in the 1.0340 - 1.0370 range and continues to strengthen. Overall, however, the pair is still in a downtrend. The US Fed has been much more aggressive in fighting inflation than the ECB and this continues to put pressure on the bearish trend in the euro. The nearest resistance according to the H4 chart is at 1.058 - 1.0600. Strong resistance according to the daily chart is at 1.0780 - 1.0800.   The Czech National Bank raised the interest rate again Rising inflation, which has already reached 16% in the Czech Republic, forced the CNB's board to raise interest rates again. The key interest rate is now at 7%. The last time the interest rate was this high was in 1999. This is the last decision of the old Bank Board. In August, the new board, which is not clearly hawkish, will decide on monetary policy. Therefore, it will be very interesting to see how they approach the rising inflation.   The current risks, according to the CNB, are higher price growth at home and abroad, the risk of a halt in energy supplies from Russia and generally rising inflation expectations. The lingering risk is, of course, the war in Ukraine. The CNB has also decided to continue intervening in the market to keep the Czech koruna exchange rate within acceptable limits and prevent it from depreciating, which would increase import inflation pressures. Figure 5: The USD/CZK and The EUR/CZK on the daily chart Looking at the charts, the koruna hardly reacted at all to the CNB's decision to raise rates sharply. Against the dollar, the koruna is weakening somewhat, while against the euro the koruna is holding its value around 24.60 - 24.80. The appreciation of the koruna after the interest rate hike was probably prevented by uncertainty about how the new board will treat inflation, and also by the fact that there is a risk-off sentiment in global markets and investors prefer so-called safe havens in such cases, which include the US dollar.  
COT Week 26 Charts: Energy Speculator bets mostly higher led by WTI Crude Oil & Natural Gas

COT Week 26 Charts: Energy Speculator bets mostly higher led by WTI Crude Oil & Natural Gas

Invest Macro Invest Macro 02.07.2022 17:24
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday June 28th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Energy market speculator bets were mostly higher this week as four out of the six energy markets we cover had higher positioning this week while two markets had lower contracts. Leading the gains for energy markets was WTI Crude Oil (10,190 contracts) and Natural Gas (1,450 contracts) with the Bloomberg Commodity Index (703 contracts) and Gasoline (692 contracts) also showing a positive week. Meanwhile, leading the declines in speculator bets this week was Brent Crude Oil (-4,667 contracts) with Heating Oil (-2,056 contracts) also registering lower bets on the week. Strength scores (measuring the 3-Year range of Speculator positions, from 0 to 100 where above 80 percent is extreme bullish and below 20 percent is extreme bearish) show that the Bloomberg Commodity Index (79 percent) and Heating Oil (54 percent) are above the midpoint for the past 3 years while all the other markets are below the 50 percent level. Gasoline and WTI Crude are in extreme bearish positions as each come in at 3 percent currently. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that Heating Oil (16 percent) and the Bloomberg Commodity Index (9 percent) are also the only markets that have rising trend scores currently. Brent Crude Oil (-13 percent) and WTI Crude (-9 percent) are leading the downside trends. Data Snapshot of Commodity Market Traders | Columns Legend Jun-28-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,651,566 0 299,692 3 -327,938 99 28,246 55 Gold 497,005 13 157,693 2 -182,007 98 24,314 16 Silver 135,775 3 10,891 0 -18,485 100 7,594 0 Copper 182,352 14 -30,696 20 31,197 81 -501 22 Palladium 7,765 6 -3,825 1 4,441 100 -616 8 Platinum 68,232 36 -1,306 2 -3,381 100 4,687 27 Natural Gas 987,740 0 -129,419 40 90,840 60 38,579 71 Brent 173,920 19 -42,677 40 41,434 62 1,243 26 Heating Oil 269,168 23 7,508 53 -25,743 44 18,235 62 Soybeans 653,337 11 137,193 56 -106,705 52 -30,488 20 Corn 1,338,054 0 328,102 72 -274,110 33 -53,992 12 Coffee 194,896 2 45,200 78 -47,147 26 1,947 9 Sugar 734,324 0 122,709 62 -132,877 43 10,168 20 Wheat 291,041 0 7,679 29 -1,871 57 -5,808 80   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week resulted in a net position of 299,692 contracts in the data reported through Tuesday. This was a weekly advance of 10,190 contracts from the previous week which had a total of 289,502 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 3.4 percent. The commercials are Bullish-Extreme with a score of 98.6 percent and the small traders (not shown in chart) are Bullish with a score of 54.8 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.0 36.3 4.9 – Percent of Open Interest Shorts: 5.8 56.2 3.2 – Net Position: 299,692 -327,938 28,246 – Gross Longs: 396,046 599,957 80,880 – Gross Shorts: 96,354 927,895 52,634 – Long to Short Ratio: 4.1 to 1 0.6 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 3.4 98.6 54.8 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -8.7 12.6 -14.1   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week resulted in a net position of -42,677 contracts in the data reported through Tuesday. This was a weekly decline of -4,667 contracts from the previous week which had a total of -38,010 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.6 percent. The commercials are Bullish with a score of 62.2 percent and the small traders (not shown in chart) are Bearish with a score of 26.0 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 14.8 53.8 3.6 – Percent of Open Interest Shorts: 39.3 30.0 2.9 – Net Position: -42,677 41,434 1,243 – Gross Longs: 25,712 93,538 6,241 – Gross Shorts: 68,389 52,104 4,998 – Long to Short Ratio: 0.4 to 1 1.8 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 39.6 62.2 26.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -13.1 15.5 -20.3   Natural Gas Futures: The Natural Gas Futures large speculator standing this week resulted in a net position of -129,419 contracts in the data reported through Tuesday. This was a weekly advance of 1,450 contracts from the previous week which had a total of -130,869 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.7 percent. The commercials are Bullish with a score of 59.5 percent and the small traders (not shown in chart) are Bullish with a score of 71.5 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.6 40.8 6.3 – Percent of Open Interest Shorts: 33.7 31.6 2.4 – Net Position: -129,419 90,840 38,579 – Gross Longs: 203,204 402,705 62,574 – Gross Shorts: 332,623 311,865 23,995 – Long to Short Ratio: 0.6 to 1 1.3 to 1 2.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 39.7 59.5 71.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.3 8.4 -28.5   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week resulted in a net position of 32,099 contracts in the data reported through Tuesday. This was a weekly advance of 692 contracts from the previous week which had a total of 31,407 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.8 percent. The commercials are Bullish-Extreme with a score of 94.6 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 81.7 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.6 53.7 8.0 – Percent of Open Interest Shorts: 15.4 68.4 4.4 – Net Position: 32,099 -42,454 10,355 – Gross Longs: 76,657 154,967 23,177 – Gross Shorts: 44,558 197,421 12,822 – Long to Short Ratio: 1.7 to 1 0.8 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 2.8 94.6 81.7 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.7 4.3 -17.4   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week resulted in a net position of 7,508 contracts in the data reported through Tuesday. This was a weekly fall of -2,056 contracts from the previous week which had a total of 9,564 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.5 percent. The commercials are Bearish with a score of 43.9 percent and the small traders (not shown in chart) are Bullish with a score of 61.5 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.5 52.6 14.9 – Percent of Open Interest Shorts: 13.7 62.1 8.2 – Net Position: 7,508 -25,743 18,235 – Gross Longs: 44,423 141,515 40,222 – Gross Shorts: 36,915 167,258 21,987 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.5 43.9 61.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.0 -9.9 -5.4   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week resulted in a net position of -7,349 contracts in the data reported through Tuesday. This was a weekly gain of 703 contracts from the previous week which had a total of -8,052 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 79.4 percent. The commercials are Bearish with a score of 20.4 percent and the small traders (not shown in chart) are Bearish with a score of 21.6 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 27.6 68.6 0.7 – Percent of Open Interest Shorts: 38.8 57.9 0.2 – Net Position: -7,349 7,041 308 – Gross Longs: 18,077 45,029 456 – Gross Shorts: 25,426 37,988 148 – Long to Short Ratio: 0.7 to 1 1.2 to 1 3.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 79.4 20.4 21.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 8.8 -7.5 -13.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview - Week 27 2022

The Swing Overview - Week 27 2022

Purple Trading Purple Trading 08.07.2022 10:27
The Swing Overview - Week 27 2022 The fall in US bond yields, the rise in the US dollar and the sharp weakening in the euro, which is heading towards parity with the dollar. This is how the last week, in which stock indices cautiously strengthened and made a correction in the downward trend, could be characterised. It is worth noting that Germany has a negative trade balance for the first time since May 1991. Is the country losing its reputation as an economic powerhouse of Europe? Macroeconomic data The ISM in manufacturing, which shows purchasing managers' expectations of economic developments in the short term, came in at 53.0 for June.  While a value above 50 still indicates an expected expansion in the sector, the trend since the beginning of the year has been declining, indicating worsening of optimism.   Unemployment claims reached 231,000 last week. This is still a level that is fairly normal. However, we note that this is the 6th week in a row that the number of claims has been rising. The crucial news on the labour market will then be shown in Friday's NFP data.   On Wednesday, the minutes of the last FOMC meeting were presented, which confirmed that another 50-75 point rate hike is likely in July. The minutes also stated that the Fed could tighten further its hawkish policy if inflationary pressures persist. The Fed's target is to push inflation down to around 2%.   The Fed's hawkish tone has led to a strengthening of the dollar, which has reached a level over 107, its highest level since October 2002. Following the presentation of the FOMC minutes, the US Treasury yields started to rise again. Figure 1: The US 10-year bond yields and the USD index on the daily chart   The SP 500 Index The temporary decline in US Treasury yields was the reason for the correction in the bearish trend in equity indices. However, the bear market still continues to be supported fundamentally by fears of an impending recession.  Figure 2: The SP 500 on H4 and D1 chart   The nearest resistance according to the H4 chart is in the 3,930 - 3,950 range. A support is at 3,740 - 3,750 and then 3,640 - 3,670.    German DAX index The German manufacturing PMI for June came in at 52.0 (previous month 54.8). The downward trend shows a deterioration in optimism.    It is worth noting that Germany's trade balance is negative for the first time since May 1991, i.e. imports are higher than exports. The current trade balance is - EUR 1 billion. The market was expecting a surplus of 2.7 billion. Rising prices of imported energy and a reduction in exports to Russia have contributed to the negative balance. Figure 3: German DAX index on H4 and daily chart The DAX is in a downtrend. On the H4 chart, it has reached the moving average EMA 50. The resistance is in the range of 12,900 - 12,960. Strong support on the daily chart is 12,443 - 12,500, which was tested again last week.    Euro is near parity with the USD Even high inflation, which is already at 8.6%, has not stopped the euro from falling. It seems that parity with the dollar could be reached very soon. The negative trade balance in Germany has contributed very significantly to the euro's decline.  Figure 4: EUR/USD on H4 and daily chart The nearest resistance according to the H4 chart is at 1.020 - 1.021. Support according to the daily chart would be only at parity with the dollar at 1.00. Reaching this value would represent a unique situation that has not occurred on the EUR/USD pair since 2002.   Australia raised interest rates The Reserve Bank of Australia raised the interest rate by 0.50% as expected. The current interest rate now stands at 1.35%. According to the central bank, the Australian economy has been solid so far thanks to commodity exports, the prices of which have been rising. Unemployment is 3.9%, the lowest level in 50 years.   One uncertainty is the behaviour of consumers, who are cutting back on spending in times of high inflation. A significant risk is global development, which is influenced by the war in Ukraine and its impact on energy and agricultural commodity prices.   Figure 5: The AUD/USD on H4 and daily chart The AUD/USD is in a downtrend and even the rate hike did not help the Australian dollar to strengthen. However, there has been some correction in the downtrend. The resistance according to the H4 chart is 0.6880 - 0.6900. The support is at 0.6760 - 0.6770.  
COT Week 27 Charts: Stock Market Speculators bets mostly lower led by S&P500 & MSCI EAFE Mini

COT Week 27 Charts: Stock Market Speculators bets mostly lower led by S&P500 & MSCI EAFE Mini

Invest Macro Invest Macro 09.07.2022 14:15
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday July 5th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. The stock market speculator bets were mostly lower for a second straight week this week as three out of the eight stock markets we cover had higher positioning this week while five markets had lower contracts. Leading the gains for stock markets was the Nasdaq Mini (6,705 contracts) with the VIX (4,068 contracts) and Dow Jones Industrial Average Mini (1,990 contracts) also showing positive weeks. Meanwhile, leading the decreases in speculator bets this week were the S&P500 Mini (-44,456 contracts) and with MSCI EAFE Mini (-31,197 contracts), Russell 2000 Mini (-13,973 contracts), MSCI Emerging Markets Mini (-4,586 contracts) and the Nikkei 225 USD (-130 contracts) also registering lower bets on the week. Strength scores (measuring the 3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the Nasdaq Mini (92.3 percent) is at the highest level of the stock markets currently followed by the VIX (86.4 percent). Both are in extreme bullish levels compared to the past three years of speculator sentiment. On the lower end, the Russell 2000 Mini (0 percent) and the MSCI EAFE Mini (0 percent) are in bearish-extreme levels and at their lowest level of positioning of the past three years. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that the S&P500 Mini (-43.1 percent) and MSCI EAFE Mini (-37.5 percent) are leading the down-trending scores over the past six weeks. The Nasdaq Mini, meanwhile, leads the trends to the upside with a 9.6 percent trend change. Data Snapshot of Stock Market Traders | Columns Legend Jul-05-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index S&P500-Mini 2,309,241 8 -183,682 22 221,625 100 -37,943 18 Nikkei 225 14,508 11 -1,745 69 3,210 46 -1,465 10 Nasdaq-Mini 259,449 48 30,895 92 -25,919 11 -4,976 38 DowJones-Mini 67,437 24 -23,083 7 27,554 96 -4,471 15 VIX 266,933 17 -45,501 86 52,406 15 -6,905 58 Nikkei 225 Yen 60,276 44 3,916 46 25,226 88 -29,142 15   VIX Volatility Futures: The VIX Volatility large speculator standing this week came in at a net position of -45,501 contracts in the data reported through Tuesday. This was a weekly lift of 4,068 contracts from the previous week which had a total of -49,569 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 86.4 percent. The commercials are Bearish-Extreme with a score of 14.6 percent and the small traders (not shown in chart) are Bullish with a score of 57.9 percent. VIX Volatility Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.2 54.0 8.8 – Percent of Open Interest Shorts: 34.3 34.4 11.4 – Net Position: -45,501 52,406 -6,905 – Gross Longs: 45,972 144,271 23,601 – Gross Shorts: 91,473 91,865 30,506 – Long to Short Ratio: 0.5 to 1 1.6 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 86.4 14.6 57.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.0 0.7 2.3   S&P500 Mini Futures: The S&P500 Mini large speculator standing this week came in at a net position of -183,682 contracts in the data reported through Tuesday. This was a weekly reduction of -44,456 contracts from the previous week which had a total of -139,226 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 22.2 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.4 percent. S&P500 Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 10.3 77.6 9.9 – Percent of Open Interest Shorts: 18.2 68.0 11.5 – Net Position: -183,682 221,625 -37,943 – Gross Longs: 237,370 1,791,046 227,663 – Gross Shorts: 421,052 1,569,421 265,606 – Long to Short Ratio: 0.6 to 1 1.1 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 22.2 100.0 18.4 – Strength Index Reading (3 Year Range): Bearish Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -43.1 42.5 -3.8   Dow Jones Mini Futures: The Dow Jones Mini large speculator standing this week came in at a net position of -23,083 contracts in the data reported through Tuesday. This was a weekly advance of 1,990 contracts from the previous week which had a total of -25,073 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 7.1 percent. The commercials are Bullish-Extreme with a score of 96.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 14.5 percent. Dow Jones Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.4 67.4 15.3 – Percent of Open Interest Shorts: 50.6 26.5 22.0 – Net Position: -23,083 27,554 -4,471 – Gross Longs: 11,053 45,425 10,349 – Gross Shorts: 34,136 17,871 14,820 – Long to Short Ratio: 0.3 to 1 2.5 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 7.1 96.3 14.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.2 1.6 -12.2   Nasdaq Mini Futures: The Nasdaq Mini large speculator standing this week came in at a net position of 30,895 contracts in the data reported through Tuesday. This was a weekly increase of 6,705 contracts from the previous week which had a total of 24,190 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 92.3 percent. The commercials are Bearish-Extreme with a score of 10.6 percent and the small traders (not shown in chart) are Bearish with a score of 38.3 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.2 52.9 13.6 – Percent of Open Interest Shorts: 20.3 62.9 15.6 – Net Position: 30,895 -25,919 -4,976 – Gross Longs: 83,514 137,186 35,380 – Gross Shorts: 52,619 163,105 40,356 – Long to Short Ratio: 1.6 to 1 0.8 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 92.3 10.6 38.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 9.6 -9.1 -4.8   Russell 2000 Mini Futures: The Russell 2000 Mini large speculator standing this week came in at a net position of -118,593 contracts in the data reported through Tuesday. This was a weekly lowering of -13,973 contracts from the previous week which had a total of -104,620 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 12.3 percent. Russell 2000 Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.2 88.2 3.4 – Percent of Open Interest Shorts: 27.4 67.1 4.2 – Net Position: -118,593 123,533 -4,940 – Gross Longs: 42,435 517,591 19,684 – Gross Shorts: 161,028 394,058 24,624 – Long to Short Ratio: 0.3 to 1 1.3 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 0.0 100.0 12.3 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -24.8 24.2 -7.5   Nikkei Stock Average (USD) Futures: The Nikkei Stock Average (USD) large speculator standing this week came in at a net position of -1,745 contracts in the data reported through Tuesday. This was a weekly fall of -130 contracts from the previous week which had a total of -1,615 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 69.2 percent. The commercials are Bearish with a score of 45.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.9 percent. Nikkei Stock Average Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 28.4 55.8 15.5 – Percent of Open Interest Shorts: 40.4 33.7 25.6 – Net Position: -1,745 3,210 -1,465 – Gross Longs: 4,119 8,101 2,250 – Gross Shorts: 5,864 4,891 3,715 – Long to Short Ratio: 0.7 to 1 1.7 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 69.2 45.7 9.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.1 0.2 2.3   MSCI EAFE Mini Futures: The MSCI EAFE Mini large speculator standing this week came in at a net position of -33,183 contracts in the data reported through Tuesday. This was a weekly decrease of -31,197 contracts from the previous week which had a total of -1,986 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 91.2 percent. MSCI EAFE Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.1 90.6 3.8 – Percent of Open Interest Shorts: 12.9 84.8 1.8 – Net Position: -33,183 24,926 8,257 – Gross Longs: 21,492 384,305 15,954 – Gross Shorts: 54,675 359,379 7,697 – Long to Short Ratio: 0.4 to 1 1.1 to 1 2.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 0.0 100.0 91.2 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -37.5 33.7 41.4   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
COT Week 27 Charts: Energy Speculator bets drop led by WTI Crude Oil & Gasoline

COT Week 27 Charts: Energy Speculator bets drop led by WTI Crude Oil & Gasoline

Invest Macro Invest Macro 09.07.2022 15:11
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday July 5th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Energy market speculator bets were lower this week as just one out of the six energy markets we cover had higher positioning this week while the other five markets had lower contracts. The only market to show speculator bet gains for energy markets was Brent Crude Oil with a gain of +4,163 contracts. Meanwhile, leading the declines in speculator bets this week were WTI Crude Oil (-19,169 contracts) and Gasoline (-4,078 contracts) with Natural Gas (-1,100 contracts), Heating Oil (-1,022 contracts) and the Bloomberg Commodity Index (-137 contracts) also registering lower bets on the week. Strength scores (measuring the 3-Year range of Speculator positions, from 0 to 100 where above 80 percent is extreme bullish and below 20 percent is extreme bearish) show that the Bloomberg Commodity Index (78.8 percent) is above its midpoint for the past 3 years and leads the way for the energy markets in speculator sentiment. Brent oil (46.5 percent) and Heating oil (52 percent) are also positive while WTI Crude (0 percent) and Gasoline (0 percent) are at the bottom of their 3-year ranges and in bearish extreme levels. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that Heating oil (18.7 percent) and the Bloomberg Commodity Index (7.8 percent) lead the rising scores over the past six weeks. WTI Crude oil, meanwhile, has been on the largest downtrend with a -17.6 percent score for the past six weeks, followed by Natural Gas (-5.7 percent) and Gasoline (-4.4 percent). Data Snapshot of Commodity Market Traders | Columns Legend Jul-05-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,637,862 0 280,523 0 -304,217 100 23,694 48 Gold 498,210 13 145,660 0 -165,585 100 19,925 0 Silver 140,463 7 5,139 0 -11,622 100 6,483 0 Copper 183,331 15 -31,796 19 31,340 81 456 28 Palladium 7,373 5 -3,410 4 4,104 98 -694 4 Platinum 72,895 44 -2,734 0 -1,670 100 4,404 23 Natural Gas 977,507 0 -130,519 39 91,950 60 38,569 71 Brent 166,711 13 -38,514 47 37,309 55 1,205 26 Heating Oil 264,269 21 6,486 52 -22,775 47 16,289 55 Soybeans 638,675 7 125,491 52 -93,638 56 -31,853 17 Corn 1,331,035 0 260,705 63 -207,441 42 -53,264 12 Coffee 193,731 1 46,787 79 -49,139 25 2,352 14 Sugar 713,245 0 83,512 54 -85,255 52 1,743 10 Wheat 288,754 0 8,384 30 623 61 -9,007 64   WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week equaled a net position of 280,523 contracts in the data reported through Tuesday. This was a weekly reduction of -19,169 contracts from the previous week which had a total of 299,692 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish with a score of 48.4 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.1 36.8 5.0 – Percent of Open Interest Shorts: 7.0 55.3 3.5 – Net Position: 280,523 -304,217 23,694 – Gross Longs: 394,943 601,996 81,558 – Gross Shorts: 114,420 906,213 57,864 – Long to Short Ratio: 3.5 to 1 0.7 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 0.0 100.0 48.4 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -17.6 23.1 -22.8   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week equaled a net position of -38,514 contracts in the data reported through Tuesday. This was a weekly lift of 4,163 contracts from the previous week which had a total of -42,677 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.5 percent. The commercials are Bullish with a score of 55.3 percent and the small traders (not shown in chart) are Bearish with a score of 25.5 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.4 52.4 4.1 – Percent of Open Interest Shorts: 38.5 30.0 3.4 – Net Position: -38,514 37,309 1,205 – Gross Longs: 25,605 87,320 6,881 – Gross Shorts: 64,119 50,011 5,676 – Long to Short Ratio: 0.4 to 1 1.7 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.5 55.3 25.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.3 -0.3 -8.1   Natural Gas Futures: The Natural Gas Futures large speculator standing this week equaled a net position of -130,519 contracts in the data reported through Tuesday. This was a weekly decline of -1,100 contracts from the previous week which had a total of -129,419 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.4 percent. The commercials are Bullish with a score of 59.9 percent and the small traders (not shown in chart) are Bullish with a score of 71.4 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.2 40.6 6.8 – Percent of Open Interest Shorts: 33.6 31.2 2.8 – Net Position: -130,519 91,950 38,569 – Gross Longs: 197,937 397,060 66,331 – Gross Shorts: 328,456 305,110 27,762 – Long to Short Ratio: 0.6 to 1 1.3 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 39.4 59.9 71.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.7 8.9 -21.6   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week equaled a net position of 28,021 contracts in the data reported through Tuesday. This was a weekly decrease of -4,078 contracts from the previous week which had a total of 32,099 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish with a score of 43.9 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.9 52.7 7.5 – Percent of Open Interest Shorts: 16.6 64.7 5.7 – Net Position: 28,021 -32,693 4,672 – Gross Longs: 72,955 142,761 20,221 – Gross Shorts: 44,934 175,454 15,549 – Long to Short Ratio: 1.6 to 1 0.8 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 0.0 100.0 43.9 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.4 10.5 -43.3   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week equaled a net position of 6,486 contracts in the data reported through Tuesday. This was a weekly fall of -1,022 contracts from the previous week which had a total of 7,508 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 52.0 percent. The commercials are Bearish with a score of 47.0 percent and the small traders (not shown in chart) are Bullish with a score of 54.8 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.0 52.7 16.0 – Percent of Open Interest Shorts: 12.5 61.3 9.9 – Net Position: 6,486 -22,775 16,289 – Gross Longs: 39,513 139,296 42,410 – Gross Shorts: 33,027 162,071 26,121 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 52.0 47.0 54.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 18.7 -12.3 -3.9   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week equaled a net position of -7,486 contracts in the data reported through Tuesday. This was a weekly lowering of -137 contracts from the previous week which had a total of -7,349 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 78.8 percent. The commercials are Bearish with a score of 21.1 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.1 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 27.4 66.8 0.5 – Percent of Open Interest Shorts: 38.4 56.1 0.2 – Net Position: -7,486 7,242 244 – Gross Longs: 18,524 45,230 367 – Gross Shorts: 26,010 37,988 123 – Long to Short Ratio: 0.7 to 1 1.2 to 1 3.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 78.8 21.1 19.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.8 -6.8 -10.4   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
COT Week 28 Charts: Energy Speculator bets mixed led by Gasoline & Heating Oil

COT Week 28 Charts: Energy Speculator bets mixed led by Gasoline & Heating Oil

Invest Macro Invest Macro 16.07.2022 15:58
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday July 12th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. Weekly Speculator Changes COT energy market speculator bets were mixed this week as three out of the six energy markets we cover had higher positioning while the other three markets saw decreasing net positions for the week. Leading the gains for energy markets was Gasoline (4,721 contracts) with Heating Oil (242 contracts) and Brent Crude Oil (126 contracts) also showing very small positive weeks. Meanwhile, leading the declines in speculator bets this week were WTI Crude Oil (-12,195 contracts) and the Bloomberg Commodity Index (-3,229 contracts) with Natural Gas (-1,084 contracts) also registering lower bets on the week.   Data Snapshot of Commodity Market Traders | Columns Legend Jul-12-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index WTI Crude 1,612,803 0 268,328 0 -294,526 100 26,198 52 Gold 542,493 26 118,121 0 -137,788 100 19,667 0 Silver 142,259 9 3,204 0 -9,612 100 6,408 0 Copper 172,037 6 -26,295 23 27,061 78 -766 21 Palladium 6,474 1 -2,802 7 3,252 93 -450 18 Platinum 75,615 48 -5,911 0 1,235 100 4,676 27 Natural Gas 969,204 0 -131,603 39 94,195 61 37,408 69 Brent 171,950 17 -38,388 47 36,619 54 1,769 33 Heating Oil 266,330 22 6,728 52 -22,853 47 16,125 54 Soybeans 611,751 1 115,119 49 -87,284 57 -27,835 24 Corn 1,333,199 0 247,156 62 -196,533 44 -50,623 14 Coffee 195,810 2 34,308 68 -35,166 37 858 0 Sugar 701,144 0 105,869 58 -115,779 46 9,910 20 Wheat 288,182 0 4,639 25 5,041 67 -9,680 60   Strength Scores Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the Bloomberg Commodity Index (66.5 percent) and Heating Oil (52.3 percent) lead the energy markets this week. The Bloomberg Commodity Index has been the strongest strength score in the past few weeks but came down from a 78.8 percent score last week showing a weakening strength compared to the 3-year range. On the downside, WTI Crude Oil (0.0 percent) and Gasoline (4.7 percent) come in as the lowest strength scores currently and are both in bearish extreme levels (near the bottom of their 3-year ranges). Strength Statistics: WTI Crude Oil (0.0 percent) vs WTI Crude Oil previous week (3.8 percent) Brent Crude Oil (46.8 percent) vs Brent Crude Oil previous week (46.5 percent) Natural Gas (39.1 percent) vs Natural Gas previous week (39.4 percent) Gasoline (4.7 percent) vs Gasoline previous week (0.0 percent) Heating Oil (52.3 percent) vs Heating Oil previous week (52.0 percent) Bloomberg Commodity Index (66.5 percent) vs Bloomberg Commodity Index previous week (78.8 percent) Strength Trends Strength Score Trends (or move index, calculates the 6-week changes in strength scores) show that Heating Oil (9.7 percent) leads the past six weeks trends for energy this week. Brent Crude Oil (4.2 percent) is the only positive mover in the latest trends data. WTI Crude Oil (-20.1 percent) leads the downside trend scores currently while the next market with lower trend scores was Natural Gas (-6.4 percent) followed by Gasoline (-1.0 percent). Strength Trend Statistics: WTI Crude Oil (-20.1 percent) vs WTI Crude Oil previous week (-16.9 percent) Brent Crude Oil (4.2 percent) vs Brent Crude Oil previous week (1.3 percent) Natural Gas (-6.4 percent) vs Natural Gas previous week (-5.7 percent) Gasoline (-1.0 percent) vs Gasoline previous week (-4.4 percent) Heating Oil (9.7 percent) vs Heating Oil previous week (18.7 percent) Bloomberg Commodity Index (-0.6 percent) vs Bloomberg Commodity Index previous week (7.8 percent) Individual Markets: WTI Crude Oil Futures: The WTI Crude Oil Futures large speculator standing this week resulted in a net position of 268,328 contracts in the data reported through Tuesday. This was a weekly fall of -12,195 contracts from the previous week which had a total of 280,523 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bullish with a score of 51.9 percent. WTI Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.3 36.6 5.1 – Percent of Open Interest Shorts: 6.6 54.9 3.5 – Net Position: 268,328 -294,526 26,198 – Gross Longs: 375,155 590,438 82,523 – Gross Shorts: 106,827 884,964 56,325 – Long to Short Ratio: 3.5 to 1 0.7 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 0.0 100.0 51.9 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -20.1 25.2 -20.6   Brent Crude Oil Futures: The Brent Crude Oil Futures large speculator standing this week resulted in a net position of -38,388 contracts in the data reported through Tuesday. This was a weekly rise of 126 contracts from the previous week which had a total of -38,514 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.8 percent. The commercials are Bullish with a score of 54.2 percent and the small traders (not shown in chart) are Bearish with a score of 33.1 percent. Brent Crude Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.6 52.2 4.1 – Percent of Open Interest Shorts: 38.0 30.9 3.1 – Net Position: -38,388 36,619 1,769 – Gross Longs: 26,868 89,831 7,060 – Gross Shorts: 65,256 53,212 5,291 – Long to Short Ratio: 0.4 to 1 1.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.8 54.2 33.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.2 -3.9 -2.2   Natural Gas Futures: The Natural Gas Futures large speculator standing this week resulted in a net position of -131,603 contracts in the data reported through Tuesday. This was a weekly lowering of -1,084 contracts from the previous week which had a total of -130,519 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.1 percent. The commercials are Bullish with a score of 60.6 percent and the small traders (not shown in chart) are Bullish with a score of 68.7 percent. Natural Gas Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 18.9 41.2 6.8 – Percent of Open Interest Shorts: 32.5 31.4 2.9 – Net Position: -131,603 94,195 37,408 – Gross Longs: 183,194 398,833 65,940 – Gross Shorts: 314,797 304,638 28,532 – Long to Short Ratio: 0.6 to 1 1.3 to 1 2.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 39.1 60.6 68.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -6.4 10.9 -31.3   Gasoline Blendstock Futures: The Gasoline Blendstock Futures large speculator standing this week resulted in a net position of 32,742 contracts in the data reported through Tuesday. This was a weekly increase of 4,721 contracts from the previous week which had a total of 28,021 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 4.7 percent. The commercials are Bullish-Extreme with a score of 94.0 percent and the small traders (not shown in chart) are Bullish with a score of 54.1 percent. Nasdaq Mini Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 25.1 55.1 7.3 – Percent of Open Interest Shorts: 13.4 69.2 5.1 – Net Position: 32,742 -38,954 6,212 – Gross Longs: 69,876 153,217 20,335 – Gross Shorts: 37,134 192,171 14,123 – Long to Short Ratio: 1.9 to 1 0.8 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 4.7 94.0 54.1 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.0 6.8 -40.8   #2 Heating Oil NY-Harbor Futures: The #2 Heating Oil NY-Harbor Futures large speculator standing this week resulted in a net position of 6,728 contracts in the data reported through Tuesday. This was a weekly increase of 242 contracts from the previous week which had a total of 6,486 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 52.3 percent. The commercials are Bearish with a score of 46.9 percent and the small traders (not shown in chart) are Bullish with a score of 54.2 percent. Heating Oil Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 13.8 52.7 16.1 – Percent of Open Interest Shorts: 11.3 61.3 10.1 – Net Position: 6,728 -22,853 16,125 – Gross Longs: 36,724 140,444 43,002 – Gross Shorts: 29,996 163,297 26,877 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 52.3 46.9 54.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 9.7 -5.2 -6.0   Bloomberg Commodity Index Futures: The Bloomberg Commodity Index Futures large speculator standing this week resulted in a net position of -10,715 contracts in the data reported through Tuesday. This was a weekly lowering of -3,229 contracts from the previous week which had a total of -7,486 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 66.5 percent. The commercials are Bearish with a score of 33.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.7 percent. Bloomberg Index Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.4 72.9 0.5 – Percent of Open Interest Shorts: 39.5 57.1 0.2 – Net Position: -10,715 10,480 235 – Gross Longs: 15,577 48,468 360 – Gross Shorts: 26,292 37,988 125 – Long to Short Ratio: 0.6 to 1 1.3 to 1 2.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 66.5 33.6 18.7 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.6 1.7 -12.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
What Does Inflation Rates We Got To Know Mean To Central Banks?

What Does Inflation Rates We Got To Know Mean To Central Banks?

Purple Trading Purple Trading 15.07.2022 13:36
The Swing Overview – Week 28 2022 This week's new record inflation readings sent a clear message to central bankers. Further interest rate hikes must be faster than before. The first of the big banks to take this challenge seriously was the Bank of Canada, which literally shocked the markets with an unprecedented rate hike of a full 1%. This is obviously not good for stocks, which weakened again in the past week. The euro also stumbled and has already fallen below parity with the usd. Uncertainty, on the other hand, favours the US dollar, which has reached new record highs.   Macroeconomic data The data from the US labour market, the so-called NFP, beat expectations, as the US economy created 372 thousand new jobs in June (the expectation was 268 thousand) and the unemployment rate remained at 3.6%. But on the other hand, unemployment claims continued to rise, reaching 244k last week, the 7th week in a row of increase.   But the crucial news was the inflation data for June. It exceeded expectations and reached a new record of 9.1% on year-on-year basis, the highest value since 1981. Inflation rose by 1.3% on month-on-month basis. Energy prices, which rose by 41.6%, had a major impact on inflation. Declines in commodity prices, such as oil, have not yet influenced June inflation, which may be some positive news. Core inflation excluding food and energy prices rose by 5.9%, down from 6% in May.   The value of inflation was a shock to the markets and the dollar strengthened sharply. We can see this in the dollar index, which has already surpassed 109. We will see how the Fed, which will be deciding on interest rates in less than two weeks, will react to this development. A rate hike of 0.75% is very likely and the question is whether even such an increase will be enough for the markets. Meanwhile, there has been an inversion on the yield curve on US bonds. This means that yields on 2-year bonds are higher than those on 10-year bonds. This is one of the signals of a recession. Figure 1: The US Treasury yield curve on the monthly chart and the USD index on the daily chart   The SP 500 Index Apart from macroeconomic indicators, the ongoing earnings season will also influence the performance of the indices this month. Among the major banks, JP Morgan and Morgan Stanley reported results this week. Both banks reported earnings, but they were below investor expectations. The impact of more expensive funding sources that banks need to finance their activities is probably starting to show.   We must also be interested in the data in China, which, due to the size of the Chinese economy, has an impact on the movement of global indices. 2Q GDP in China was 0.4% on year-on-year basis, a significant drop from the previous quarter (4.8%). Strict lockdowns against new COVID-19 outbreaks had an impact on economic situation in the country. Figure 2: SP 500 on H4 and D1 chart The threat of a recession is seeping into the SP 500 index with another decline, which stalled last week at the support level, which according to the H4 is in the 3,740-3,750 range. The next support is 3,640 - 3,670.  The nearest resistance is 3,930 - 3,950. German DAX index The German ZEW sentiment, which shows expectations for the next 6 months, reached - 53.8. This is the lowest reading since 2011. Inflation in Germany reached 7.6% in June. This is lower than the previous month when inflation was 7.9%. Concerns about the global recession continue to affect the DAX index, which has tested significant supports. Figure 3: German DAX index on H4 and daily chart Strong support according to the daily chart is 12,443 - 12,500, which was tested again last week. We can take the moving averages EMA 50 and SMA 100 as a resistance. The nearest horizontal resistance is 12,950 - 13,000.   The euro broke parity with the dollar The euro fell below 1.00 on the pair with the dollar for the first time in 20 years, reaching a low of 0.9950 last week. Although the euro eventually closed above parity, so from a technical perspective it is not a valid break yet, the euro's weakening points to the headwinds the eurozone is facing: high inflation, weak growth, the threat in energy commodity supplies, the war in Ukraine. Figure 4: EUR/USD on H4 and daily chart Next week the ECB will be deciding on interest rates and it is obvious that there will be some rate hike. A modest increase of 0.25% has been announced. Taking into account the issues mentioned above, the motivation for the ECB to raise rates by a more significant step will not be very strong. The euro therefore remains under pressure and it is not impossible that a fall below parity will occur again in the near future.   The nearest resistance according to the H4 chart is at 1.008 - 1.012. A support is the last low, which is at 0.9950 - 0.9960.   Bank of Canada has pulled out the anti-inflation bazooka Analysts had expected the Bank of Canada to raise rates by 0.75%. Instead, the central bank shocked markets with an unprecedented increase by a full 1%, the highest rate hike in 24 years. The central bank did so in response to inflation, which is the highest in Canada in 40 years. With this jump in rates, the bank is trying to prevent uncontrolled price increases.   The reaction of the Canadian dollar has been interesting. It strengthened significantly immediately after the announcement. However, then it began to weaken sharply. This may be because investors now expect the US Fed to resort to a similarly sharp rate hike. Figure 5: USD/CAD on H4 and daily chart Another reason may be the decline in oil prices, which the Canadian dollar is correlated with, as Canada is a major oil producer. The oil is weakening due to fears of a drop in demand that would accompany an economic recession. Figure 6: Oil on the H4 and daily charts Oil is currently in a downtrend. However, it has reached a support value, which is in the area near $94 per barrel. The support has already been broken, but on the daily chart oil closed above this value. Therefore, it is not a valid break yet.  
Which stock market sector is currently interesting due to its volatility?

Which stock market sector is currently interesting due to its volatility?

Purple Trading Purple Trading 18.07.2022 07:57
Which stock market sector is currently interesting due to its volatility While long-term investors in physical shares are not too interested in volatility, CFD traders can make potentially very nice profits from it. However, equity markets are vast and it can happen that an interesting title slips through one’s fingers. This article will make sure that it doesn't happen. What is volatility and how is it created If you were to equate the words volatility and nervousness (or moodiness) you would not be far off the mark. Indeed, volatility is really a measure of nervousness in the markets and where there is nervousness, there is also uncertainty. Uncertainty in the markets can arise for many different reasons, but it usually happens before the release of important macroeconomic news (on our economic calendar), you can identify those by the three bulls' heads symbols) or during unexpected events with a major impact on a particular market sector or the geopolitical order of the world (natural disasters, wars).   On the charts of trading platforms, you can recognize a highly volatile market by the dynamically changing price of the instrument, the market is said to be going up or down, and if you switch to a candle chart, you may notice large candles. Conversely, non-volatile, calm markets move sideways without any significant dips or rises. Volatility can also be historical or implied, but we'll write about that another time. Now, let’s talk about how can one potentially profit from volatility and where to find suitable markets to do so.   How to potentially profit from volatility For intraday and swing traders, volatility is the key to their potential success. For traders, often the worst situation is the so-called "sideways" market movement, where the asset in question goes "sideways" without significant movements either up or down. With small and larger price fluctuations, traders can potentially generate interesting profits. One of the most volatile markets is the stock market, where some news can trigger very significant price movements. Events such as important economic reports, a stock split, or an acquisition announcement, for example, can move the price of a given stock. In addition, traders using CFDs for share trading can also use leverage to multiply any gains (and losses) in a given volatility.   The key to potential success is choosing the right stock titles. Some stocks and sectors can be considered more volatile, while others can go longer periods of time without significant fluctuations. So how do you look for volatility? Several indicators measure price movements in stocks, perhaps the most well-known is beta, which measures the volatility of a given stock compared to a benchmark stock index (typically the S&P 500 for US stocks). The beta indicator is listed on most well-known stock sites, but we can calculate it using the following formula: Beta = 1 In this case, the stock is highly correlated with the market and we can expect very similar movements to the benchmark index.   Beta < 1 If the beta is less than 1, we can consider the stock to be potentially less volatile than the stock market.   Beta > 1 Stocks with a beta greater than 1 are theoretically more volatile than the benchmark index. So, for example, if a stock's beta is 1.1, we think of it as 10% more volatile. It is stock titles with a beta above 1 that should be of most interest to investors looking to take advantage of volatility. However, it is not enough to monitor the beta alone, traders should not forget to monitor important news and fundamentals related to the company and the market in general. Thus, it is advisable to choose a few companies whose stocks have been significantly volatile in the past and where we expect strong movements due to positive and negative news to continue. So which sectors may be worth following? In which sectors can you potentially benefit from high volatility? Energy sector The energy companies sector has historically been one of the most volatile, as confirmed by the course of 2022 so far. The price development of energy companies is of course strongly linked to the price of energy commodities. These have had a great year - both natural gas and oil have appreciated by several tens of percent since the beginning of the year. However, this growth has not been without significant fluctuations, often by higher units of percent per day. The current geopolitical situation and growing talk of recession promise to continue the volatility in the sector. In the chart below, you can see the movement of Exxon Mobil Corp shares in recent weeks. Chart 1: Exxon Mobil shares on the MT4 platform on the H1 timeframe along with the 50 and 100-day moving averages Travel industry Shares of companies related to the travel industry have always been very volatile. According to data from the beginning of the year (NYU Stern), even the companies classified as hotels and casinos were the most volatile when measured by beta. Given the coronavirus pandemic, this is not surprising. However, the threat of coronavirus still persists and there is currently the talk of another wave. However, global demand for travel is once again strong. Airlines and hotels are beginning to recover from the previous two dry years. As a result, both positive and negative news promises potential volatility going forward. In the chart below, you can see the movement of Hilton Hotels Corp shares in recent weeks. Chart 2: Hilton Hotels shares on the MT4 platform on the H1 timeframe along with the 50 and 100-day moving averages Technology Technology is a very broad term - some companies in a given sector can be considered "blue chip" stocks, which can generally be less volatile and have the potential to appreciate nicely over time. These include Apple or Microsoft, for example. However, even these will not escape relatively high volatility in 2022. Traders looking for even stronger moves, however, will be more interested in smaller companies such as Uber, Zoom Technologies, Palantir, or PayPal. In the chart below, we can see the evolution of Twitter stock, which has undergone significant volatility in recent weeks. This was linked to the announcement of the acquisition (April gap) and its recent recall by Elon Musk. With both opposing parties facing a court battle, similarly wild news is just more water on the volatility mill. Chart 3: Twitter shares on the MT4 platform on the H1 timeframe along with the 50 and 100-day moving averages There are, of course, more sectors that are significantly volatile. Traders can follow companies in the healthcare sector, for example, where coronavirus vaccine companies are among the most interesting ones. Restaurants or aerospace and chemical companies can also be worth looking at. But few things can move stock markets as significantly as the economic cycle. We'll look at the impact of expansion and recession on stocks in our next article.  
Siemens Gained 27% But Announced Its First Loss Since 2010. What Are The Causes?

Siemens Gained 27% But Announced Its First Loss Since 2010. What Are The Causes?

Conotoxia Comments Conotoxia Comments 12.08.2022 10:00
Germany's Siemens, a manufacturer of technology to automate and digitalise businesses and households by supplying hydraulic, electrical and electronic equipment and household appliances, today reported revenue growth of 27% (year-on-year) and 1% growth between quarters. What happened? This exceeded analysts' expectations of €17.47 billion, reaching €17.87 billion in Q3 (the financial year starts earlier than the calendar year). This growth was mainly attributed to an increase in orders from the areas of business automation and intelligent infrastructure.   "Demand in the European capital goods sector is holding up," commented Barclays last week, following the publication of results from other companies in the sector, such as ABB and Schneider Electric. This was also confirmed by CEO Roland Busch, who said that demand remained strong in the quarter despite an environment affected by sanctions on Russia, high inflation and the ongoing effects of a pandemic. However, it is worth noting that these companies typically operate on long-term contracts and the decline in demand can be noticed after a long delay.    Siemens has a strongly diversified business, not only in terms of products but also in respect of the countries of origin of its customers. However, this may not protect it from the looming recession, which seems to be a problem not only for Europe or the US but for the whole world.    Alarming are, for example, the data of the German manufacturing PMI (Purchasing Managers' Index), which measures the assessment of the economic situation by managers. This index is currently at almost its lowest level in two years. The results in other countries in Europe and America also look similar. Asian economies also appear to be weakening.   Siemens also incurred a net loss of €1.66 billion charge for the write-down of the value of its stake in Siemens Energy, which operated in Russia. In addition, the company estimates that it has incurred additional losses of €0.6 billion due to the actions of the Russian Federation.   Despite high energy prices, Siemens is struggling to make savings from its 35% stake in the turbine and wind energy company. It has had a difficult two years since the spin-off in 2020, with operational problems and losses in the Siemens Gamesa wind turbine division.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)   Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Siemens posted its first loss since 2010, yet shares are gaining
Saxo Bank Podcast: The Upcoming Bank Of Japan Meeting, A Look At Crude Oil, Copper And More

Japanese Yen (JPY) Rise. Energy Prices Are Finally Falling!?

John Hardy John Hardy 16.08.2022 10:05
Summary:  Weak data out of China overnight, together with a surprise rate cut from the PBOC and collapsing energy prices later on Monday saw the Japanese yen surging higher across the board. Indeed, the two key factors behind its descent to multi-decade lows earlier this year, rising yields and surging energy prices, have eased considerably since mid-June with only modest reaction from the yen thus far. Is that about to change? FX Trading focus: JPY finding sudden support on new disinflation narrative Weaker than expected Chinese data overnight brought a surprise rate cut from the Chinese central bank and seems to have sparked a broadening sell-off in commodities, which was boosted later by a crude oil drop of some five dollars per barrel on the news that Iran will decide by midnight tonight on whether to accept a new draft on the nuclear deal forward by the Euro zone. In response, the Chinese yuan has weakened toward the highs for the cycle in USDCNH, trading 6.78+ as of this writing and  (there was a spike high to 6.381 back in May but the exchange rate has been capped by 6.80 since then), but the Japanese yen is stealing the volatility and strength crown, surging sharply across the board and following up on the move lower inspired by the soft US CPI data point. US long yields easing considerably lower after an odd spike last Thursday are a further wind at the JPY’s back here. In the bigger picture, it has been rather remarkable that the firm retreat in global long-date yields since the mid-June peak and the oil price backing down a full 25% and more from the cycle highs didn’t do more to support the yen from the yield-spread angle (Bank of Japan’s YCC policy less toxic as yields fall) and from the current account angle for Japan. Interestingly, while the JPY has surged and taken USDJPY down several notches, the US dollar is rather firm elsewhere, with the focus more on selling pro-cyclical and commodity currencies on the possible implication that China may be content to export deflation by weakening its currency now that commodity prices have come down rather than on selling the US dollar due to any marking down of Fed expectations. Still, while the USD may remain a safe haven should JPY volatility be set to run amok across markets, the focus is far more on the latter as long as USDJPY is falling Chart: EURJPY As the JPY surges here, EURJPY is falling sharply again, largely tracking the trajectory of longer European sovereign yields, which never really rose much from their recent lows from a couple of weeks back, making it tough to understand the solid rally back above 138.00 of late. After peaking above 1.90% briefly in June, the German 10-year Bund, for example, is trading about 100 basis points lower and is not far from the cycle low daily close at 77 basis points. The EURJPY chart features a rather significant pivot area at 133.50, a prior major high back in late 2021 and the recent low and 200-day moving average back at the beginning of the month. After a brief JPY volatility scare in late July and into early August that faded, are we set for a second and bigger round here that takes USDJPY down through 130.00 and EURJPY likewise? A more significant rally in long US treasuries might be required to bring about a real JPY rampage. Source: Saxo Group The focus on weak Chinese data and key commodity prices like copper suddenly losing altitude after their recent rally has the Aussie shifting to the defensive just after it was showing strength late last week in sympathy with strong risk sentiment and those higher commodity prices. Is the AUDUSD break above 0.7000-25 set for a high octane reversal here? AUDJPY is worth a look as well after it managed to surge all the way back toward the top of the range before. The idea that a weak Chine might export deflation from here might be unsettling for Aussie bulls. The US macro data focus for the week is on today’s NAHB homebuilder’s survey, which plunged to a low since 2015 in June (not including the chaotic early 2020 pandemic breakout months), the July Housing Starts and Building Permits and then the July Retail Sales and FOMC minutes on Wednesday. With a massive relief in gasoline prices from the July spike high, it will be interesting to see whether the August US data picks up again on the services side. The preliminary August University of Michigan sentiment survey release on Friday showed expectations rising sharply by over 7 points from the lowest since-1980 lows of June, while the Present Situation measure dropped a few points back toward the cycle (and record) lows from May. Table: FX Board of G10 and CNH trend evolution and strength. The JPY is the real story today, but as our trending measures employ some averaging/smoothing, the move will need to stick what it has achieved today to show more. Watch out for a big shift in the commodity currencies in coming days as well if today’s move is the start of something. Elsewhere, the JPY comeback is merely taking CHF from strength to strength, although even the might franc has dropped against the JPY today. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. Big momentum shift afoot today and watching whether this holds and the JPY pairs and pairs like AUDUSD and USDCAD to see if we are witnessing a major momentum shift in themes here. Also note NOK pairs like USDNOK and EURNOK here. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1400 – US Aug. NAHB Housing Market Index 0130 – Australia RBA Meeting Minutes Source: FX Update: JPY jumps on deflating energy prices, fresh retreat in yields.
The Euro To US Dollar Instrument Did Not Change In Value

The Peak Of Inflation May Be Yet To Come? ECB Takes Steps

Conotoxia Comments Conotoxia Comments 19.08.2022 12:38
Inflation in the Eurozone appears to be rising steadily, which may be influenced by the rising cost of electricity and energy carriers. Today's release of producer prices in Germany suggests that the peak of inflation in the Eurozone may be yet to come. Germany is the eurozone's largest economy, so published readings for that economy could heavily influence data for the community as a whole. Energy for businesses rose by 105 percent. Today we learned that in July producer prices (PPI inflation) rose in Germany at the fastest pace on record. PPI inflation on an annualized basis was as high as 37.2 percent. A month earlier, price growth stood at 32.7 percent, while the market consensus was for inflation of 32 percent. Energy prices still seem to remain the main driver of producer costs. The cost of the aforementioned energy for businesses rose 105 percent compared to July 2021. Had it not been for this factor, producer prices could have risen much more slowly, by only 14.6 percent. - according to the published data. Entrepreneurs could translate such a significant increase in costs into their products, which could also raise consumer CPI inflation as a result. Hence, it is not impossible that a possible peak in inflation in the eurozone is yet to come. It could fall in the last quarter of this year, or early next year, assuming that energy prices begin to stabilize or fall. Otherwise, the eurozone economy could plunge into a deep crisis. EUR/USD near parity again The rate of the EUR/USD pair fell today to 1.0084 (yesterday it was around 1.0200) and again approached parity at 1.0000. Concerns about the eurozone economy may be reflected in the exchange rate. However, it seems that the reaction to negative data is becoming less and less, as if the market has to some extent already discounted some of the bad news that may come in the near future. The European Central Bank's forthcoming actions may put the brakes on the euro's sell-off. According to the interest rate market, the ECB may opt for two rate hikes of 50 basis points each this fall. The market assumes that the ECB will raise the main interest rate to 1.5 percent throughout the cycle. Unlike the Fed, which may reduce the pace of hikes at the end of the year, the ECB may only move with a rapid increase in interest rates. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: PPI inflation in Germany highest on record. Euro under pressure
Copper Spreads Widen as Demand Pressures Continue Amidst Industrial Slowdown

Covid Vaccine Caused The World Of Business To Come Back From The Dead, The History Repeats Itself

Peter Garnry Peter Garnry 19.08.2022 16:42
 Summary:  The world and the global equity market can be divided into two parts; the tangible and the intangible. Since 2008 the tangibles driven industry groups have severely underperformed the intangibles driven industry groups due falling interest rates and an explosion in profits by companies utilising a lot of intangibles in their business model. However, since the Covid vaccine was announced the world came roaring back causing demand to outstrip supply and thus fueling inflation. The lack of supply of physical goods in the world and deglobalisation will be a theme going forward and our bet is that the tangible world will stage a comeback against the intangible world. The Great Financial Crisis proved to be the end of the tangible world The SaxoStrats team has been talking a lot about how intangibles took over the world and now the time has come for the tangible world to win back some terrain as years of underinvestment has created enormous supply deficits in energy, food, metals, construction materials etc. We have finally created two indices capturing the market performance of intangibles and tangibles driven industry groups. These indices will make it easier to observe performance in these two parts of the economy and will enable us to quantify whether our “tangibles are coming back” thesis is correct. When we look at intangibles vs tangibles over the period 1998-2022 it is clear we two distinct periods. From 1998-2008 the tangible part of the economy delivered the best total return to investors driven by a booming financial sector, rising real estate prices, and a commodities super cycle. Since 2008, the separation of the two parts of the economy becomes very clear. Lower and lower interest rates are inflating equity valuations of growth assets and intangibles driven industry groups are seeing an unprecedented acceleration in profits due to software business models maturing and e-commerce penetrating all consumer markets fueling the outperformance. If we look at the relative performance the tangible world peaked in April 2008 and was more or less in a continuous decline relative to the intangible world until October 2020. In November 2020, the revelation of the Covid vaccine reopened the economy so fast that demand come roaring back to a degree in which the physical supply of goods could not keep up. Prices began to accelerate causing the current run-away inflation and headache for central banks. The tangible world has since done better relative to intangibles and if we are right in our main theme of an ongoing energy and food crisis combined a multi-decade long deglobalisation then tangibles should continue to do well. Intangibles are still ahead despite rising interest and the current energy crisis During the pandemic the intangibles driven industry groups did better than the physical world because the whole world went into lockdown. Intangibles driven industries were suddenly necessary for making the world go around when we could not operate in the physical world. Government stimulated the economy in extraordinary amounts across monetary and fiscal measures and the demand outcome from this stimulus has caused global demand to outstrip available supply and especially of things in the physical world. The outcome of this has been inflation and also a comeback to the tangible world, but the tangibles driven industry groups are still behind the intangibles measured from the starting point of December 2019. It is our expectations that as interest rates are lifted to cool demand and inflation in the short-term the tangible world will gain more relative to intangibles. What has been the best performing industry group since 1998? One thing is to look at the aggregated indices of the tangibles and intangibles driven industry group, but another interesting observation is to look at the best performing industry. There were three close industry groups, but by a small amount the performing industry group has actually been the retailing industry. The industry group was not creating a lot of shareholder value until after the Great Financial Crisis when the e-commerce, automation, and digitalization combined with expansion of manufacturing in China lifted profitability and market value of retailing companies. The largest retailing companies in the industry group today are Amazon.com, Home Depot, Alibaba, Lowe’s, Meituan, and JD.com. Our definition of tangible and intangible industry groups Tangible assets are loosely defined as physical assets one can touch and feel, and which can be collateralised for loans. This definition is too broad and not meaningful, because in the consumer services industry group, which we have defined as driven by intangibles, you find companies such as Starbucks and McDonald’s which both employ a lot of physical assets in their business. The way we have defined intangibles and tangibles driven industry groups was going back to 1998 and calculate the market value to assets for all the active companies at that point in time. We need calculated the average ratio for each of the 24 industry groups. All the industry groups with a ratio above the average of all groups we put into the intangibles. If the market value is substantially above the book value of assets on the balance sheet it must mean that the market is putting a value on something that is not there, or at least in accounting terms, and this is clearly the intangibles. So for McDonald’s they do employ a lot of physical assets but it is the branding, store network, product etc. that derives the meaningful value creation and thus the market is valuing the company way above the book value of its assets. One could argue that McDonald’s is a hybrid company but for our purposes we define it as being mostly intangibles driven. The full list is presented below. Banks are interesting because many think they are driven by intangibles because it employs a lot of people, but the thing is that banks are essentially deriving their profits from the spread between loans and deposits. The majority of bank loans are tied to physical assets and thus banks are tightly connected to the physical world. Tangibles driven industry groups Automobiles & Components Banks Capital Goods Commercial & Professional Services Consumer Durables & Apparel Diversified Financials Energy Food & Staples Retailing Insurance Materials Real Estate Telecommunication Services Transportation Utilities Intangibles driven industry groups Consumer Services Food, Beverage & Tobacco Health Care Equipment & Services Household & Personal Products Media & Entertainment Pharmaceuticals, Biotechnology & Life Sciences Retailing Semiconductors & Semiconductor Equipment Software & Services Technology Hardware & Equipment Source: The tangible world is fighting back
Saxo Bank Podcast: Natural Gas On Colder Weather, Wheat And Coffee Under Pressure, JPY Weaker And More

Governments Are Looking Into Ways To Mitigate The Impact Of Higher Energy Prices

ING Economics ING Economics 03.09.2022 08:55
  It is no secret that Europe is heading for a severe energy crisis. Energy prices have already skyrocketed but companies and households will only be confronted with higher energy bills in the coming months. While rising bills are inevitable, the other big risk for Europe is supply disruption In this article Europe's gas storage tanks are 80% full Governments are stepping in Europe's gas storage tanks are 80% full Amid all the doom and gloom, there is at least some positive news in that European countries have been able to fill gas storage ahead of schedule. The European Commission has asked member states to fill reserves up to at least 80% by 1 November. Most countries have already reached that level well ahead of time. Overall, Europe is currently at 80.2%, which is about two months ahead of time. European gas storage has been filling up Natural gas, stock level, country total, fill level (%) Source: Gas Infrastructure Europe (GIE), Macrobond Governments are stepping in This means that the EU has chosen to pay a high price to achieve sufficient gas supply ahead of the winter. At the same time, it is no guarantee that shortages will not happen. As Europe still relies on further imports in the winter months, there is a chance that a cold winter still results in shortages. If these shortages occur, it will be at the end of the winter. However, it currently also looks as if energy supply issues could go beyond this winter into next. While countries are filling their national gas reserves, governments are looking into ways to tackle or at least mitigate the impact of higher energy prices on consumers and corporates. Measures differ between countries, both in terms of magnitude and nature. We provide an overview of the current state of play below and expect more measures to be announced in the coming weeks. National policies introduced to help consumers with rising energy prices Western Europe Eastern Europe   Energy Source: https://think.ing.com/articles/how-europe-is-preparing-for-a-hard-winter/?utm_campaign=September-01_how-europe-is-preparing-for-a-hard-winter&utm_medium=email&utm_source=emailing_article&M_BT=1124162492   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German labour market starts the year off strongly

Better Supply Chain Status Contrasted With Ecological Problems And Energy Prices. Situation In Germany Leaves Investors With Mixed Feelings

ING Economics ING Economics 05.09.2022 12:51
With disappointing July trade data, the German economy starts the third quarter on a weak footing Trade is no longer a growth driver but has become a drag on German growth Germany: Exports and imports declined German exports (seasonally and calendar-adjusted) disappointed at the start of the third quarter and dropped by 2.1% month-on-month in July. Imports also decreased, by 1.5% month-on-month, lowering the trade surplus to €5.4bn, from €6.2bn in June. Exports to Russia as a result of the sanctions almost came to a standstill and fell by another 15% month-on-month. Lower energy imports from Russia were the reason for German imports from Russia to drop by more than 17% MoM. Trade is no longer a growth driver but has become a drag on German growth. Since the second quarter of 2021, the growth contribution of net exports has actually been negative. Global supply chain frictions, geopolitical risks and rising production costs are the obvious drivers behind this new trend. Looking ahead, the outlook for German trade is mixed. There is some relief in supply chains and transportation costs. However, at the same time, low water levels, high energy prices and the possible fundamental change in supply chains and production processes on the back of geopolitical uncertainty will be clear obstacles to growth. After yesterday’s encouraging increase in July retail sales, today’s trade data add to the long list of growth concerns for the German economy in the second half of the year. Read this article on THINK TagsGermany Exports Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Short-term analysis - Euro to US dollar by InstaForex - 31/10/22

Eurozone: Retail Sales Rose Because Of Increased Food And Fuel Consumption

ING Economics ING Economics 05.09.2022 14:30
The small increase in retail sales at the start of the third quarter brings little optimism about the outlook. Increased food and fuel spending masked a decline in sales for all other items. Expect consumption to decline from here on due to the purchasing power squeeze that the eurozone is going through Eurozone retail sales in July Retail sales increased by 0.3% in July, which is small enough for this uptick to be in line with the downward trend seen in recent months. The peak in retail sales was in November and sales in July were about 2.5% below that level. Food and fuel caused the small increase in July as all other items saw a decline of -0.4% in terms of sales volumes. A strong increase in Germany and the Netherlands masked declines in the other large eurozone markets. Don’t expect this to be the start of a sustained upturn in sales. The outlook remains rather bleak for the months ahead as real incomes go through an unprecedented squeeze due to high inflation and lagging wages. We expect consumption to contract for the coming quarters on the back of this. For the European Central Bank though, it is definitely no smoking gun for the start of a contraction. With the September meeting coming up and October of course not long after, the doves are looking for clear evidence that the economy is moving into contraction territory. Today’s data will, in that sense, not be of much help. Still, evidence of a recessionary environment is likely to become more apparent as new data comes in. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oil Is An Indicator Of The Health Of The Global Economy

Liz Truss As The New Party Leader. OPEC+ And Production Cut

Saxo Bank Saxo Bank 06.09.2022 09:50
Summary:  While the US markets were closed overnight for Labor Day, the futures this morning in Asia are indicating some respite after weeks of red. The US dollar was also softer in early Asian hours, while the focus remains on the European energy crisis and the EU emergency meeting scheduled for Friday. A token cut by OPEC+ and diminishing hope of a revival of the Iran nuclear deal supported oil prices, although China’s tightening restrictions continue to pose demand concerns. Sterling made a sharp recovery after new UK PM Liz Truss announced plans to freeze energy bills, easing some short-term concerns. Consensus expects another 50 basis points rate hike from Reserve Bank of Australia today, and US ISM services will be on the radar later. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. stock markets were closed for Labor Day. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) The treasury market was closed for Labor Day. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng TECH Index (HSTECH.I) plunged 1.9% as a Bloomberg story, citing people familiar with the matter, said that the Biden administration is considering imposing restrictions on US investments in Chinese technology companies, Bilibili (09626:xhkg) -3.2%, JD.COM (09618:xhkg) -3.0%, Tencent (00700:xhkg) -2.9%, Alibaba (09988:xhkg) -2.4%. Hang Seng Index fell 1.2%. Chengdu, the largest city in western China, extended its pandemic control lockdown for another three days. The spread of Covid-19 cases and pandemic control measures fueled risk-off sentiment in the market.  Over the weekend, the U.S. Trade Representative said that it received requests from more than 350 American companies to plead for keeping the “Section 301” tariff on goods imported from China, and the Biden administration will remain in place during the review. BYD (01211:xhkg) fell 5.9%, as exchange filing showed that Berkshire Hathaway continued to off-load its stake in BYD.  Other car makers lost as well, Geely (00175) -7%, NIO -6,9, Li Auto 02.3(August).  Thermal coal prices surged in China, following the news that Russia’s Gazprom suspended the supply of natural gas to Germany on the Nord Stream pipeline.  Share prices of coal miners gained, Yancoal Australia (03668:xhkg) +6.6%, Yankuan (01171:xhkg) +12.2%, China Coal (01898:xhkg) +8.3%.  Caixin China Services PMI came in at 55.0, edging down slightly from 55.5 in July but above market expectations. CSI300 spent the day in range-bound trading.  GBPUSD falls to fresh lows, EUR in focus this week The USD lost some ground early in Asia on Tuesday with GBPUSD making the most gains to rise towards 1.1600 as the appointment of new Prime Minister and her plan to freeze energy bills spelled some short-term relief. EURUSD saw a brief drop to 20-year lows below 0.99 yesterday but rose back to 0.9960+ levels in early Asian trading. EURGBP seen sliding slower to 0.8600 but downside may be limited if ECB decides to go for a 75bps rate hike today. But the energy situation and the EU summit on Friday certainly garners more attention with some tough decision ahead. USDJPY retreated from Friday’s 24-year highs of 140.80 to 140.30-levels with Japan’s household spending underperforming expectations at 3.4% y/y vs. expectations of 4.6% y/y. Wage pressures, which remain a key focus for Bank of Japan, also eased with labor cash earnings up 1.8% y/y from last month’s 2.0% y/y. Crude oil prices (CLU2 & LCOV2) Crude oil prices rose on Monday as OPEC+ announced an output cut of 100k bpd in October (more details below). The intention appears to be to keep Brent prices capped at $100/barrels. WTI futures rose to $89/barrel while Brent was above $95/barrel. Price action was also supported by a diminishing hope of a revival of the Iran nuclear deal. US and Iranian positions have diverged in recent days, and it is now expected that the negotiations could stretch beyond the US midterm elections in November. Still, it is key to watch the demand concerns picking up as well, particularly as China lockdowns were extended and will likely remain strict ahead of the CCP meeting on October 16. What to consider? OPEC+ announced a production cut by 100k bpd A token cut by OPEC+ last night of 100k barrels per day just reverses the output increase agreed to last month. The decision was ‘symbolic’, with the new quotas taking effect for October. The amount is significantly small compared to a 100 million bpd market but it shows that OPEC+ wants to set a floor near $100/barrel in Brent. Saudi Arabian oil minister Prince Abdulaziz bin Salman had warned last week that a cut was a possibility given what he said was a disconnect between financial and physical oil markets. The RBA meets today, and is expected to raise rates to 2.35% regardless of the property market struggling Consensus expects the RBA to hike rates by 0.5% which will take Australia’s official interest rate to 2.35%. That will be the highest rate since 2015. However, interest rates futures are pricing in a smaller hike, of just 0.4%. The RBA will likely then proceed to rise rates over the rest of 2022 and then continue to rise rates into the 2023, in a bid to stave off inflation. The issue is, the RBA only has one tool to fight inflation, which is rising rates. But the property market is already struggling to absorb the 1.75% in hikes from May, with property prices falling at their quickest pace since the 80s and construction seeing its biggest decline since 2016. This has seen banks margins (profits) be squeezed, and they face a further squeeze. Why? Australia has one of the highest debt levels in the world (Debt to GPD is 126%). So if the RBA keeps rising rates to slow inflation, it could cause a credit issue and debt to income levels are at risk of hitting GFC highs. RBA outcomes for investors, traders and the macro landscape We highlighted sectors to watch and why yesterday in the Saxo Spotlight. That's worth a quick read. Today, we will be watching what the RBA estimates inflation to be, at the end of the year, remembering the RBA previously said it expects inflation to peak at under 8%. But consider, we traditionally see peak energy (coal) demand later this year, which is likely to support coal prices higher. As such, we think the RBA will rise its inflation target and may allude to commentary about keeping rates higher. For investors and traders, we will be watching energy stocks, which will likely get extra bids today and see momentum rise (not only because of the energy crisis in Europe), but also because Australian energy prices (coal) remains supported, with Australian energy reserves expected to also run out next year. For traders, the currency pair that we are watching is the AUDEUR for an extension to the upside, on the basis that Europe will need to increase energy imports and its balance of trade will likely continue to worsen, vs the Australian balance of trade, likely to hit another record high, with Australian LNG and coal exports to see a lift in demand.    PBOC cuts FX deposit reserve requirement ratio by 200 bps to restrain yuan weakness The PBoC announced that the central bank is cutting the reserve requirement ratio for foreign exchange deposits (the “FX RRR”) to 6% from 8%, effective September 15.  The cut is expected to release about USD19 billion (2% of the USD954 billion FX deposits outstanding) in FX liquidity for banks to make loans in foreign currencies.   The PBoC last cut the FX RRR to 8% from 9% on May 15, in an attempt to send a signal to the market to put a pause to the depreciation of the USDCNY which had weakened from 6.40 to 6.80 in one month (April 15 to May 13, 2022).  After the surge of the USDCNY from 6.75 to above 6.90 in about half a month since Aug 15, the PBoC apparently wants to send a signal again to the market to slow the speed of the renminbi depreciation against the U.S. dollar. Liz Truss won the contest to become the next UK Prime Minister In the UK, the Conservative party has voted for Liz Truss as the new party leader, making her the UK’s next Prime Minister. Her promises range from quick action on energy security to alleviating the cost-of-living crisis for the hardest hit by price rises, all while cutting corporate and other taxes. She has announced a GBP 130bn plan to freeze energy bills, a recipe for ballooning fiscal deficits, an issue that is already an ingredient in sterling’s steep fall this year, so an even steeper recession is in the wings. This could come either from a drop in real GDP due to soaring inflation aggravated by further sterling declines or as demand is crushed by a steep recession due to the need for the Bank of England to accelerate its pace of rate hikes or more likely a combination of the two. Longer term, investments in fracking shale gas and new North Sea exploration could pay dividends. Russia makes a clear case of weaponizing gas supplies While the Kremlin had earlier said that they were halting gas supplies on Nord Stream 1 for a technical fault, it has now clearly said that gas supplies to Europe via the Nord Stream 1 pipeline will not resume in full until the “collective west” lifts sanctions against Moscow over its invasion of Ukraine. Russia is still supplying gas to Europe via Soviet-era pipelines through Ukraine that have remained open despite the invasion, as well as the South Stream pipeline via Turkey. But supplies along the northern pipeline routes, including Nord Stream 1 and the pipelines through Ukraine, have fallen by more than 90% since September last year. Higher supplies from Norway, the UK, north Africa and increased imports of LNG have helped to an extent offset the loss of Russian supplies. Energy summit in EU on Friday EU leaders will meet this Friday to discuss a cap on energy prices across EU countries to limit the disruptions from soaring and illiquid pricing markets, although given limits on generation capacity, much of them due to Russia’s cutting off of gas supplies - possibly semi-permanently in the case of the Nord Stream 1 pipeline – some sort of rationing plan may be required. See our colleague Christopher Dembik’s piece on at the difficult choices Europe faces on this issue here. US ISM services PMI due today With the services sector of the US economy slowing, there are expectations of a slight retreat in August US ISM services, but it should still remain above the 50-mark which differentiates between expansion and contraction. The S&P services PMI for August had also shown a slight decline to 44.1, with the payroll data hinting at still-strong labor market conditions in the services economy.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-6-sept-2022-06092022
Disappointing German March macro data increase risk of technical recession

Germany: Supply Chains Issues Caused By The War, Lockdowns In China, Water Levels And Finally Energy Prices Worry Germans

ING Economics ING Economics 07.09.2022 09:48
Production in the construction sector prevented industrial activity from falling further in July. At the same time, high energy prices are leaving their mark on German industry   Is this the first gust of wind preluding a perfect storm? In July 2022, production in industry in real terms was down by 0.3% on the previous month on a price, seasonally and calendar adjusted basis, from an upwardly revised 0.8% MoM in June. On the year, industrial production was down by 1.1%. According to the statistical office, the relatively small number of school holidays and holiday leave prevented an even larger decrease in production compared with July last year. On the month, production in industry, excluding energy and construction, was down by 1.0%. Outside industry, energy production in July was up by 2.8% and production in construction by 1.4% from the previous month. Compared with developments in the second quarter, industrial production is down, while the construction sector shows some resilience. High energy prices have become biggest concern German industry is clearly suffering from disrupted supply chains on the back of the war in Ukraine, the aftermath of pre-summer lockdowns in China, low water levels in the main rivers and increasingly, higher energy prices. The statistical office released additional data showing that production in the energy-intensive industrial segments declined by more than the broader industry (-1.9% year-on-year). Production in this area has dropped by 6.9% since February 2022. For Germany’s industrial backbone, small and medium-sized enterprises, higher energy prices look like a ticking time bomb. With ongoing pressure on consumers’ disposable incomes, companies’ pricing power is fading. In this regard, it is remarkable that the government’s third relief package presented on Sunday provided only very limited support for this segment of the economy. Looking ahead, shrinking order books since the start of the Ukraine war, the well-known supply chain problems (both international and domestic) plus high uncertainty, high energy and commodity prices and potential energy supply disruptions will not make life any easier. Judging from the first macro data for the third quarter, the German economy has not fallen off a cliff at the start of the third quarter but is rather sliding into recession. Read this article on THINK TagsIndustrial propduction Germany Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oz Minerals’ Quarterly Copper Output Hit A Record High, Brent Futures Rose

The Copper Has Stopped Falling, The Overall Macroeconomic Sentiment Remains Weak

Saxo Bank Saxo Bank 08.09.2022 14:29
Summary:  Copper is showing signs of stabilizing despite a current negative sentiment towards China-centric commodities. While the overall macro-economic sentiment remains weak, not only in China but also globally due to heightened recession fears, the copper market is showing emerging signs of fundamental strength as mining companies struggle to meet their production targets while demand, surprisingly from China, has lifted tightness in the London market. Copper is showing signs of stabilizing despite an overriding negative sentiment towards China-centric commodities such as copper, cotton and now also crude oil after both WTI and Brent slumped below support on Wednesday. The country’s battle with Covid and the governments steadfast support for its zero tolerance has led to renewed lockdowns and restrictions of movements in regions with around 300 million citizens and that account for one-quarter of Chinas GDP.  It is therefore interesting to note that copper has stopped falling and so far, this week has managed a small bounce after finding support last week at $3.36 per pound. While the overall macro-economic sentiment remains weak, not only in China but also globally due to heightened recession fears, the copper market is showing emerging signs of fundamental strength as mining companies struggle to meet their production targets – top producer Chile has seen its exports slump to a 19-month low due to water restrictions and lower ore quality - while demand from China, surprisingly is showing signs of strengthening.  The current energy crisis in Europe and the increased focus on de-carbonization across the world, not least in China, remains the key driver behind our long-term bullish outlook for copper. These latest developments have driven the spread between spot and the three-month contract on LME to at $145 per tons high today. A backwardation of this magnitude, which normally signals tighter conditions, was last seen last November. Adding to this a continued drop in inventories monitored by the three major copper futures exchanges in London, New York and Shanghai to 193,000 tons, the lowest since January, and speculators are beginning to have second thoughts about continuing to hold net short positions. For the short-term prospect to improve further the recent pickup in demand from China needs to be driven by real demand. At this point it is unclear whether the increase purchases of copper are due a re-opening of the arbitrage window between LME and Shanghai, restocking or just simply a hedge against a weaker Yuan. Having found support last week at $3.36/lb, after retracing 61.8% retracement of the July to August rally, copper is currently staring at resistance in the $3.54 area where recent lows and the 55-day moving average merges. For a real upside and trend reversal to occur the price needs to break above $3.78/lb while a break below $3.36/lb could see the metal take aim at $3/lb.   Source: Copper: supply fundamentals trump weak sentiment | Saxo Group (home.saxo)
Copper prices hit lowest level this year. Crude oil decreased second day in a row. BoE went for a 25bp hike

Commodities: Metals Boosted, It's Time To Talk Energy Crisis In The EU

ING Economics ING Economics 09.09.2022 15:08
Metals have received somewhat of a boost, with supply risks growing and some optimism in Chinese construction. For energy markets, all attention will be on EU energy crisis talks today Source: Shutterstock Energy - EU energy crisis talks today The oil market yesterday managed to recoup some of its declines from earlier in the week. ICE Brent continues to trade below US$90/bbl and the market will be watching for any signs from OPEC+ of possible intervention. The partial recovery in the market comes despite fairly bearish EIA numbers. The EIA reported that US commercial crude oil inventories increased by 8.85MMbbls over the last week - the largest increase seen since April. When you factor in the SPR release, total US crude oil inventories increased by a more modest 1.32MMbbls. An increase in crude imports, lower exports and lower refinery utilization (due to the BP Whiting outage) over the week all contributed to the crude build. Despite lower refinery activity, gasoline and distillate fuel oil stocks increased by 333Mbbls and 95Mbbls respectively. European gas prices continue to trade in a volatile manner, with TTF breaking below EUR200/MWh at one stage yesterday, only to finish the day above EUR220/MWh. The market will be sensitive to developments today, given that EU ministers will be meeting to go through proposals to tackle the energy crisis. These proposals include various forms of a price cap, along with potentially mandatory demand cuts not just for gas but also the power market. Liquidity measures for European power companies will also be pretty high on the priority list. As we have mentioned before - while price caps will offer some relief to consumers, it doesn’t help the market try to balance itself through demand destruction.   Metals – Escondida strike lifts copper prices LME copper prices ended the day higher, amid reports of potential mine strikes in Chile. Workers at BHP’s Escondida, the world’s largest copper mine, voted to go on a partial strike from next week over safety concerns, according to the mine’s union. The strike will result in a partial stoppage on 12 and 14 September and will be followed by an indefinite strike lasting until a deal with BHP is reached. Spread action also suggests a tightening in the prompt copper market. The LME copper cash/3m backwardation reached US$145/t (highest since November) yesterday, compared to a backwardation of US$76/t a day earlier and a contango of US$7.75/t at the start of 2H22. Vale SA raised its nickel production guidance to reach 230-245kt per year in the medium term, higher than its previous forecast of 200-220kt in May, the battery metal producer announced. In the long-term, Vale expects annual nickel production to reach over 300kt to tap into the growing demand for the metal. In ferrous metals, the most active SGX iron ore contract moved above US$100/t yesterday amid hopes of a recovery in construction activity in China. According to the latest market reports, the Chinese city of Zhengzhou will resume all stalled housing projects by 6 October, by making use of special loans, asking developers to return misappropriated funds, and encouraging some real estate firms to file for bankruptcy, according to Reuters reports. Read this article on THINK TagsOil Nickel Natural gas Energy crisis Copper Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The French Housing Market Is More Resilient | The Chance Of Republicans Winning The Senate Is Up

France: Industrial Production Decreased | French GDP (Gross Domestic Product) Is Expected To Decline

ING Economics ING Economics 09.09.2022 16:41
Industrial production fell sharply in July and remains 6% below its pre-pandemic level. Industry will probably contribute negatively to French economic growth in the third quarter   French industrial production fell by 1.6% over one month in July, and the decline was widespread across all branches of the industrial sector. Only construction increased its output by 0.5% over the month. Over a year, industrial production is down by 1%. It is therefore a difficult start to the third quarter for the French industrial sector, which is clearly suffering from the disruption of supply chains due to the war in Ukraine, lockdowns in China, and rising energy prices. Looking ahead, the contraction in order books since February, the high level of stocks of finished goods, high uncertainty, high energy and raw material prices, and potential disruptions to energy supplies do not point to an improved outlook for the French industrial sector. Indeed, the business climate indicator for the sector fell further in August. It is therefore likely that industry will make a negative contribution to French economic growth in the third quarter. The industrial sector only represents 15% of total French value added (20% if we include construction), so the weakness of industry is not enough in itself to conclude that the macroeconomic outlook for the next few quarters has worsened. However, the outlook is not much more favourable in the services sector. The deterioration in purchasing power caused by inflation, the decline in consumer confidence, and the fading of the positive effects of the post-pandemic reopenings will weigh on the dynamism of services in the coming months. As a result, the question is no longer really whether France and other European countries are heading for recession, but rather how fast the recession is coming. Given the developments of the last few weeks, there is a risk that French GDP growth will turn negative in the third quarter. We expect growth of 2.2% for the whole of 2022 and -0.2% for the whole of 2023.  Read this article on THINK TagsIndustrial Production GDP France Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Philippines Central Bank's Hawkish Pause: Key Developments and Policy Stance

Podcast: Discussion On Market Sentiment, Silver And Inflation And More

Saxo Bank Saxo Bank 13.09.2022 10:29
Summary:  Today we discuss the extension of momentum in equities as the market is clearly positioning itself for a weaker than expected US August inflation figure later today. The risk-on sentiment is seen across many markets including the USD which continues to weaken against the EUR which might have got some tailwinds lately from the war success in Ukraine. We also talk about Silver, but more importantly the ongoing European energy crisis that has eased a bit lately with lower energy prices across the board. Finally, we go through stocks to watch with a focus on Ocado's horrible revenue miss and Inditex's earnings tomorrow, ending with a quick rundown of today's macro calendar. Today's pod features Peter Garnry on equities and Ole S. Hansen on commodities. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.     Source: https://www.home.saxo/content/articles/podcast/podcast-sep-13-2022-13092022
Central Banks' Rates Outlook: Fed Treads Cautiously, ECB Prepares for Hike

The EU And The UK Want To Tackle Soaring Energy Prices, Bank Of England Has To Digest UK Jobs Market Data, Bitcoin's Decent Performance Ahead Of The US Inflation Data

Craig Erlam Craig Erlam 13.09.2022 15:37
We aren’t seeing much change in Europe ahead of the open on Tuesday after a broadly positive session in Asia as China, Hong Kong and South Korea returned following the bank holiday weekend. The last few days have seen a notable improvement in market sentiment. It’s not always easy to pinpoint what’s driving such a turnaround but the fact that it’s happening in the days leading up to the US inflation report is certainly interesting. Perhaps last month’s report has given investors confidence that another faster deceleration could be on the cards for August. That may sound premature but the fact is that two consecutive reports showing a sharp deceleration combined with last month’s goldilocks jobs report will be a really encouraging sign and could trigger a broader risk rebound in the markets. It may not be enough to tip the Fed balance in favour of a more modest 50 basis point rate hike next week but it may slow the pace of tightening thereafter. The Ukrainian counteroffensive in previously Russian-controlled territories in the east and the south, most notably in Kharkiv, may also be lifting sentiment. Pressure will mount on the Kremlin and while there’s no saying what its response will be, there’s certainly more hope that momentum is moving back in favour of Ukraine. Meanwhile, Europe is putting together plans to cope with higher energy prices this winter with the UK joining others in setting a cap on energy bills. While that won’t solve the problem of supplies or generate as much demand destruction, it will protect many households and businesses that otherwise wouldn’t have been able to cope this winter and could save the UK from recession. If not, it will no doubt make it much less severe. Not what the BoE wanted to see It’s not often that you see the unemployment rate fall to the lowest in almost 50 years and aren’t overjoyed, but that will certainly be the feeling at the Bank of England right now. The decline in the rate was driven by a decline in the labour force, while employment rose by only 40,000; far less than expected. What’s more, wage growth accelerated faster than expected, hitting 5.5% including bonuses in the three months to July compared with the same period last year. Less labour market slack and faster wage growth increase the odds of a 75 basis point hike from the MPC next week, especially against the backdrop of higher core inflation expectations over the medium term as a result of the new cap on energy bills. Can it build on the recovery? Bitcoin is holding onto gains ahead of the inflation data. The recovery has been very strong until this point but it may need a favourable report in order to hold onto them. A positive inflation number could see bitcoin add to recent gains with the next major test to the upside falling around $25,500. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Nerves ahead of US inflation - MarketPulseMarketPulse
Acquisition Of Aveva By Schneider Electric, Wheat Prices And More

Acquisition Of Aveva By Schneider Electric, Wheat Prices And More

Saxo Bank Saxo Bank 21.09.2022 10:36
Summary:  Equity markets traded sideways ahead of today’s important FOMC meeting as the Fed is set to bring at least another 75 basis points of tightening and expectations for further tightening are at the highs for the cycle. At the longer end of the yield curve, US yields have risen to new eleven-year highs, helping the US dollar to new highs for the cycle in places, including against the Chinese yuan. The Bank of Japan meets tonight in Asia and has shown no signs of backing down from its cap on bond yields, creating enormous attention as yields have risen again elsewhere. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities came under pressure yesterday as US yields advanced with the 10-year yield reaching as much as 3.6%. The market is split on tonight’s FOMC decision but consensus among economists is still a 75 basis point rake hike. We argued yesterday that if the Fed wants to tighten financial conditions a lot they need a surprise which argues for a 100 basis point hike. In any case, the guidance in the dot-plot and the subsequent press conference will be key for equity sentiment in the near-term. Yesterday’s low in S&P 500 futures at 3,643 is the key support level to watch on the downside and 3,800 after that. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index gave back all its gains yesterday and more, falling over 1% ahead the U.S. FOMC meeting. Mega-cap China interest stocks declined from 1% to 3%, dragging the Hang Seng Tech Index down by over 2%.  Energy stocks outperformed coal mining names up from 1% to 2%.  COSCO Shipping Energy Transportation (01138:xhkg) soared more than 8%. Bloomberg reported that Chinese refiners are applying for quotas from the Chinese government to export as much as 16.5 million tons of fuel oil, such as gasoline and diesel.  CSI 300 fell nearly 1% and making a new low last since May this year. USD traders mull FOMC meeting today A minority of observers are looking for another 75-basis point move from the Fed, as discussed below, with forward guidance also playing a roll, although the market continues to price the end-2023 policy rate at below even the end-2022 rate, with the peak rate somewhere in between, despite FEd pushback. The USD has traded to new highs in places, like against all 5 of the smallest G10 currencies and is near the cycle high versus sterling, while EURUSD and USDJPY still trade slightly away from cycle extremes. The Fed will want to maintain a hawkish tone here, but as US 2-year yields have risen sharply to nearly 4%, the bar is somewhat high for a hawkish surprise. Watching the reactivity in treasury yields and risk sentiment for the impact on the US dollar – particularly how USDJPY might treat a fresh strong surge in longer US yields after the 10-year broke above the former cycle high since 2010 of 3.50% yesterday. USDJPY USDJPY could be set for considerable volatility over the next 24 hours as the Bank of Japan meets tonight in Asia’s Thursday session. The pressure for the Bank of Japan to adjust its yield-curve-control strategy has built further on the surge to new cycle highs in longer US yields yesterday above the 3.50% level. The Bank of Japan and Ministry of finance have recently pushed back rather hard on the latest blast of JPY weakness, but will likely be challenged on where and when they intend to intervene against JPY weakness if the BoJ overnight refuses to adjust its policy and if the Fed surprises hawkish at tonight’s FOMC meeting and the entire US yield curve lifts. The 145.00 area is the cycle high, with 150.00 the next obvious psychological level. Gold (XAUUSD) Gold trades near a two-year low but within a relatively narrow 20-dollar range ahead of today’s FOMC meeting (see below). Weeks of selling have seen speculators accumulate a net short position in COMEX futures, a relatively rare occurrence, and one that could set the stage for a surprise upside move, should the dollar and yield retrace some of their recent strong gains. Resistance however remains firm at $1680 while below $1654, last week's low, the market may target the 50% retracement of the 2018 to 2020 rally at $1618. Crude oil (CLV2 & LCOX2) Crude oil remains rangebound with a slight negative tilt ahead of today’s FOMC rate hike given its impact on the dollar and growth expectations. The Fed decision will be followed by other central banks from Europe to Asia which are also expected to announce growth reducing rate hikes. The long-term outlook remains price supportive with US production struggling to find a higher gear and Saudi Aramco saying lack of investments could see spare capacity being wiped out. Also focus on Russia from where seaborne exports is lower this month and where Putin is looking into his toolbox for ideas to reverse his disastrous war against Ukraine. Ahead of today’s EIA stock report the API reported builds in crude oil as well as fuel products. Wheat sees largest gain since March on Russia tensions Wheat futures in Chicago (+7.6%) and Paris (+4.1%) jumped on Tuesday after Russia said it intended to hold votes on annexing the three regions of Ukraine still under its control (see below). Such a move raises the risk of a full Russian mobilization and would increase tensions with Europe and the US while casting more doubts over grain supplies from the Black Sea area, especially the UN sponsored export corridor from Ukraine which recently has helped ease supply worries for wheat and sunflower oils. Also focus on today’s FOMC rate hike and its impact on the dollar. December wheat (ZWZ2) at $8.88 trades near the highest level since July but may face resistance at $9.14/bu, the 200-day moving average. US Treasuries (TLT, IEF) US treasury yields spilled over to new cycle highs yesterday ahead of tonight’s FOMC meeting as the market has sensed a hawkish determination from the Fed to forge ahead with rate hike and provide no sense that it set to pivot to a more neutral stance, although that would have to come at some point. The 10-year benchmark rose to a new cycle high yesterday above 3.50%, posting the highest yield since 2011. What is going on? Shocking August German PPI According to the German statistics office Destatis, the PPI rose by 7.9 % month-on-month in August. This is much higher than the consensus (2.4 %). This shows that forecasting in the current macroeconomic environment is more challenging than ever. On a year-over-year basis, the increase is at 45.8 %. This is an historical record. The continued jump is explained by higher energy prices (+139% year-over-year). But not only. Actually, inflation is broad-based. Prices for intermediate goods, for capital goods and for non-durable consumer goods are much higher too. This will probably get worse in the short-term. In the eurozone, it is unlikely the peak in inflation has been reached (contrary to the situation in the United States). Russia-Ukraine tensions heat up Heightened geopolitical tensions regarding Russia and Ukraine where the “separatists” are to hold a referendum in Donetsk, Luhansk, Kherson and Zaporizhya on September 23rd-27th, although Ukraine and its allies have denounced the referendums as illegal, and few countries are likely to recognize the results. An update from Putin on the matter is being awaited, where there have been some suggestions that he is considering introducing martial law and full mobilisation of the Russian army - the speech has now reportedly been delayed until 06:00BST/01:00EDT Wednesday. The move threatens to escalate the conflict even further, potentially giving Putin the formal legal basis to use nuclear weapons to defend what Moscow would consider Russian territory. Riksbank’s 100bps rate hike sets the stage for FOMC The Swedish Riksbank surprised yesterday with a 100-basis point hike to take the rate to 1.75%. This, in addition to guidance that the Riksbank would look to continue hiking rates, took Swedish yields higher, but didn’t do much for the currency, which fell to new cycle lows versus the EUR and USD after a kneejerk jump. The decision to hike by 1% was unanimous, prompted by the highest level of CPIF inflation since 1991 and the negative implication it could have on the upcoming wage negotiation which will lock in pay growth for the next three years. However, with global tightening wave turning more hawkish that expectations after ECB’s 75bps rate hike and Riksbank’s 100bps, the stage is being set for the FOMC to deliver above expectations as well. Schneider Electric agrees to acquire Aveva for £9.4bn The French industrial giant is announcing this morning that it has agreed to acquire UK-based engineering and software group Aveva for £31 per share valuing the company at £9.4bn. Schneider Electric already owns 60% of Aveva and a full consolidation will bolster Schneider Electric’s ambitions in software within the engineering industry. Rio Tinto joins BHP in saying Copper’s near-term outlook is challenged Rio Tinto’s CEO has joined a suite of companies, including BHP, saying copper’s short-term outlook faces pressure. From supply-chain issues to 30-year high inflation and restricted demand from China, the metal is seeing less demand, and supply is outpacing supply. However, that is not expected to be the case in the longer term with Goldman Sachs predicting copper demand will exceed supply by 2025 and will push prices to twice their current levels. Copper is used in everything from buildings to automobiles, to wiring in homes and mobile phones. Germany nationalises utility company Uniper The German government is injecting €8bn into Uniper to avoid a collapse of the German utility taking full control of Finland-based utility Forum’s shares in Uniper. What are we watching next? Can the Fed surprise hawkish at FOMC or are we nearing peak tightening expectations? The Powell Fed has kept a hawkish tone in recent communications, clearly indicating a desire to forge ahead with rate hikes. After the strong August US CPI print, a minority of observers are even looking for a 100-bp move from the Fed today, though we are more likely to get 75 basis points. This is a quarterly meeting that will bring the latest Fed forecasts for the economy and for the policy rate, a chance for the Fed to send a further message on where it sees its policy evolving for the remainder of this year and next. The forecast in the “dot plot” of Fed policy rate forecasts for the end of 2022 will receive close attention. Currently the market is looking for a policy rate of about 4.2% through the December meeting, which would mean a 75-bp hike today, another in November, followed by a 50-bp hike in December. The Fed raising the 2023 forecast to a median of 5% might make an impression as well, although the market has persistently priced the Fed to begin easing yields at some point next year, figuring that the economy will be in recession at some point next year. This meeting also brings the first batch of 2025 forecasts for the economy and Fed policy, and another way that the Fed could guide hawkish would be in raising PCE core inflation forecasts for next year and/or 2024 (last two forecasts have kept the last of these at 2.3% YoY) or surprising with its 2025 forecast. Earnings calendar this week This week our earnings focus is on Lennar today as US homebuilders are facing multiple headwinds from still elevated materials prices and rapidly rising interest rates impacting forward demand. Later during this week, we will watch Carnival earnings as forward outlook on cruise demand is a good indicator of the impact on consumption from tighter financial conditions. Today: Lennar, Trip.com, General Mills Thursday: Costco Wholesale, Accenture, FactSet Research Systems, Darden Restaurants Friday: Carnival Economic calendar highlights for today (times GMT) 1400 – US Aug. Existing Home Sales 1430 – EIA’s Weekly Crude and Fuel Stock Report 1800 – US FOMC Rate Announcement / Policy Statement 1830 – US Fed Chair Powell Press Conference 2100 – New Zealand Q3 Westpac Consumer Confidence 2130 – Brazil Selic Rate announcement 2245 – New Zealand Aug. Trade Balance 2300 – New Zealand RBNZ Deputy Governor Hawkesby to speak Bank of Japan meeting Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-21-2022-21092022
Belarusian opposition leader proposed a collaboration to Ukraine

Varta Is Withdrawing Its Fiscal Outlook|The New Stock Is Hensoldt

Saxo Bank Saxo Bank 26.09.2022 14:45
Summary:  In our weekly update on theme baskets performance we highlight energy storage which declined 9.7% last week driven by declines among energy storage and battery providers including German-based Varta declining 38% as the company has withdrawn its fiscal outlook due to elevated energy costs and raw materials. The best relative performer was our defence basket which was bid up due to the Russian mobilisation announcement increasing the need for more weapons to Ukraine and thus lifting the outlook for the defence industyr in the US and Europe. Everything is in free fall Last Monday, we wrote our first weekly update on our equity theme baskets and the last week’s performance turns out to be a continuation of what had been doing badly two weeks, namely themes such as crypto, nextgen medicine, green transformation, e.-commerce, and energy storage. Normally, we would write about the worst and the best performing theme, but in this update we will zoom in on the energy storage theme basket because last week had some dramatic moves in this basket. Energy storage: higher energy costs complicates the transition The green transformation has more political capital behind it than ever as the European continent is set to replace its dependence on Russian energy in the years to come. But higher primary energy costs are complicating the transition making everything in manufacturing more costly. One of the companies in the energy storage basket that is under pressure from higher energy costs is Varta announcing last week that it is withdrawing its fiscal outlook for 2022 as rising raw materials and energy costs are making the business of energy storage products unpredictable. Varta’s share price was down 38% last week. The only reason why the energy storage basket is not down more last week is because the basket contains lithium and cobalt miners which are doing well due to high prices on these two metals as supply continues to be lower than demand. Defence: Russia’s mobilization lifts European defence stocks Russia’s decision last week to mobilize its reserves to drastically increase its manpower in its war in Ukraine has increased the stakes in the war and also the demand for more weapons to Ukraine. Our defence basket was the best performing basket last week down only down 3.3% with the German military company Rheinmetall being the best performing up 6.9%. Analysts remain bullish on Rheinmetall with revenue set to increase from €5.7bn in 2021 to €9.7bn in 2025 as the EU is expected to significantly increase its military spending. It could very well be that the current growth estimates are too low depending on the future outcomes in the war in Ukraine. Today we are also updating our defence basket by removing Ultra Electronics a UK-based defence and security company that has been bought by Cobham back in August. The new stock in the basket is Hensoldt which is a German military technology company which offers solutions across space, air, land, sea, security, and cyber. Source: https://www.home.saxo/content/articles/equities/weekly-update-saxo-thematic-investing-performance-26092022
Nuclear Power Emerges as Top Theme for 2023, Bubble Stocks Under Pressure

The Elasticity On Supply Of Fossil Fuels Is Low And The Green Transformation Is Accelerating Electrification

Saxo Bank Saxo Bank 04.10.2022 09:40
Summary:  Crisis brings opportunities, and the energy crisis will accelerate the energy transformation in Europe. Fossil fuels will be needed for much longer Due to the high-dimensional complexity of nature and our growing civilisation, society is running from one existential crisis to another, illuminating our fragilities. Each new crisis is unique and our response to it catapults societies on to a new trajectory—this crisis is no different. Evidence is growing that this energy crisis will invigorate concepts such as self-reliance, accelerate the green transformation in Europe and create a potential renaissance for Africa. Most importantly it will accelerate deglobalisation as the world economy splits into two competing systems, with India as the biggest question mark. The world is going through its biggest energy shock since the late 1970s with primary energy costs as a proportion of GDP rising 6.5 percent this year. It is impacting consumers hard and forcing them to cut down on consumption, but it is also forcing factories to curb production and EU politicians to draw up schemes to ration economic resources as the approaching winter puts more pressure on the already troubled energy sector. According to the International Energy Agency, the total primary energy supply to the global economy is 81 percent from coal, oil and natural gas with main source of growth coming from non-OECD countries. As the world is still run on fossil fuels it is natural that the world has spun into a crisis as prices of these three energy sources have increased 350 percent since April 2020. The price increase is the most intense ever experienced in the modern economy and, unlike the 1970s the energy crisis, is total in the sense that it is hitting transportation, heating and electricity. The recently approved US climate and tax bill is paving a legal runway for the oil, gas and coal industry to continue for longer than was expected just two years ago, using a carbon pricing and capture scheme. This may also be one of the reasons why Berkshire Hathaway has increased its stake in Occidental Petroleum and got approval to take over the majority of shares. In our Q1 Outlook we wrote that the global energy sector had the best return expectation with expected returns of 10 percent per annum. Due to rising prices on energy companies this expected annualised return has now fallen to 9 percent, but this is still making the oil and gas industry attractive The energy crisis will slowly ease as the world economy naturally adjusts to the shock and higher prices, but the adjustment will likely take many years. The challenge facing the world’s largest economies is that the elasticity on supply of fossil fuels is low and the green transformation is accelerating electrification—this will put enormous pressure on non-fossil energy sources. It almost seems like a fantasy, and so the oil and gas industry is needed to bridge the gap and prevent energy costs exploding. In order to keep energy costs down we need to see investments, but unfortunately the real capital expenditures are not really increasing at a sufficient enough speed; this is prolonging the adjustment and higher energy prices.  The green transformation will be accelerated China has talked about self-reliance for many years and now Europe is talking from the same book on its energy and defence policies. Europe was already leading the green transformation and has the most energy-efficient economy in the world, but the energy crisis and the move to become independent of Russian oil and gas is still painful for the European continent. However, crisis brings opportunities, and the energy crisis will accelerate the energy transformation in Europe. It will likely make the continent the world leader in energy technology and lead to an enormous export success in the future. While the US conquered the world during the decades-long digitalisation, the return of the physical world will see a return of Europe relative to the US. In the next 10 years the European energy and defence sectors will be drastically transformed and will become much more competitive out of necessity. But in the short term the EU will limit market forces by capping prices, which insulate the consumer on prices, but also prolong the transition while increasing the financial risk for the government absorbing the energy costs. The green transformation is dependent on energy storage, as it creates an energy mix that at times will produce a lot of excess electricity which has to be stored. One of the big potential technologies is Power-to-X, which converts excess electricity to hydrogen through electrolysis of water. Other technologies are batteries, fuel cells and vehicle-to-grid electric vehicles as load stabilisers of the grid. The table below shows our energy storage basket. It’s intended as an inspirational list of companies engaged in these different technologies, and not meant as an investment recommendation. Deglobalisation and its ramifications for equity markets The global energy crisis is grabbing most of the headlines and is directly tied to the tough winter ahead for the global economy. But the real winter for the world is not the energy crisis, but the deglobalisation current which has intensified. The US government has recently restricted Nvidia on their sales of its most advanced AI chips to China as the US government worries they are being used for military applications. The decision followed the US CHIPS Act which is the biggest US industrial policy since WWII and is aimed at quickly increasing production of semiconductors in the US. While the US is charging ahead, we are seeing the same urgency in Europe on semiconductors. China has subsequently invoked the “whole nation system” which has been used twice before, in its space programme and in biotechnology during the pandemic. This time China has decided that it has to muster more resources to become self-reliant on semiconductors. Meanwhile the US is expected to curb exports of semiconductor equipment to China, forcing China to build out the entire production chain of semiconductors. While semiconductors are just one industry the signs are telling. The moves follow the trade wars from the Trump period—the war in Ukraine has painted the picture that the world is splitting into two value systems. Longer term it will drive energy and defence policies, and critical technologies such as semiconductors, and generally reshape global supply chains. Globalisation was the biggest driver behind low inflation over the past 30 years and was instrumental for emerging markets and their equity markets. Globalisation in reverse will cause turmoil for trade surplus countries, put upward pressure on inflation and threaten the USD as the reserve currency.  One underappreciated aspect of deglobalisation and Europe’s drive for energy independence is what it means for Africa. Europe’s drive to become resource independent of Russia means that Africa must fill the gap. That puts Europe in direct longer-term competition with China over resources on the continent and here lies the next geopolitical tension. In the middle of all of this is India: can the world’s most populous country strike a truly neutral position during deglobalisation or will the country be forced to make tough choices? Based on the energy crisis, the green transformation, continued urbanisation and deglobalisation, we still prefer equity themes such as commodities, logistics, renewable energy, defence, India, energy storage and cyber security. Consumption and trade surplus countries are at risk The estimated 6.5 percentage point rise in primary energy costs is a tax on economic growth and it sucks surplus out of the private sector in terms of less disposable income available for consumption and less operating profits for investments by companies. Consumer discretionary stocks have reacted to this pressure by underperforming relative to the global equity market. The most vulnerable part of the consumer sector is the European consumer discretionary sector dominated by French luxury and German carmakers. The list below highlights the 10 largest European consumer discretionary stocks. LVMH Hermes International Christian Dior Volkswagen Inditex EssilorLuxottica Richemont Dry Mercedes-Benz BMW A drop in consumption means an equal drop in production of consumer goods which means that trade surplus countries such as Germany, China, Japan and South Korea are the most vulnerable to a significant slowdown in consumption. All four countries are facing severe structural headwinds and their equity markets have reflected these challenges this year. Our main thesis all along has been that the global equity market is facing a potential 33 percent maximum drawdown before equities reach the trough. The final leg down will likely be driven by a combination of higher interest rates for longer, profit margin compression as companies can no longer pass on rising input costs without severely hurting revenue, and likely a recession in the real economy as a function of the energy crisis. In many ways the next six months will feel like a long dark winter, but rest assured, spring always returns and the brightest days in global equities are still ahead of us. Source: https://www.home.saxo/content/articles/quarterly-outlook/the-bright-side-crises-drive-innovation-04102022
Weekly Commitment of Traders update - Buying of crude oil moderated, ICE gas oil net long reduced to a 30-month low

Drivers! OPEC+ Decision Is Shocking! Crude Oil Price Expectations Have Changed!

ING Economics ING Economics 06.10.2022 09:18
There was no doubt that OPEC+ was going to cut supply when the group met in Vienna. However, the agreed 2MMbbls/d supply cut was at the top end of expectations. While the actual cut will be quite a bit smaller, it is still enough to dramatically change the oil balance over 2023 What did OPEC+ agree? Given the amount of noise leading up to the OPEC+ meeting and the fact that the group met in person in Vienna for the first time in over two years, it was clear that the group was going to take some meaningful action. Members of the agreement have for the last couple of months voiced their concerns about the disconnect between the physical and paper market, and that the group would possibly need to take action. We recently saw OPEC+ make a symbolic paper cut of 100Mbbls/d at their September meeting, which translated to an even smaller actual cut. Growing demand concerns have left OPEC+ uneasy and in the lead-up to this week’s meeting, expectations of a supply cut grew from around 1MMbbls/d initially to eventually 2MMbbls/d. Had the group announced a cut towards the lower end of this range, the market would have likely been disappointed. Therefore, OPEC+ announced that they would be cutting supply by 2MMbbls/d from November through until the end of 2023, although output policy could be reviewed before then, if needed. This is the biggest supply reduction seen from the group since the peak of Covid However, given that the bulk of OPEC+ members are producing well below their target production levels, the actual cut seen from the group will be smaller than the announced paper cut. Our numbers suggest that the announced cut will lead to an actual cut of around 1.1MMbbls/d from August production levels. It is likely that only Saudi, UAE, Kuwait, Iraq, Gabon, Algeria and Oman will need to cut output. All other members are already producing below their new target production. This action from OPEC+ will raise some eyebrows, given the uncertain macro outlook, an ongoing energy crisis and uncertainty over how Russian oil supply will evolve once the EU ban on Russian oil and refined products comes into force, along with G7 price cap. The move will also do little to help improve relations between the US and Saudi Arabia. A big winner from these supply cuts will be Russia. They do not need to cut output, given they are already producing below their targeted levels, yet they will benefit from the higher prices we are likely to see as a result of the cuts. OPEC+ agreed paper cuts vs. actual cuts by country (Mbbls/d) Note: Actual cuts use August 2022 production levels Source: OPEC, IEA, ING Research What does this mean for oil prices? The announced cut from OPEC+ dramatically changes the oil balance for the remainder of 2022 and the whole of 2023, assuming we see full compliance. We had previously expected that the global market would see a sizeable surplus for the remainder of this year and then a more marginal surplus over the first half of 2023, before returning to deficit over the second half. However, removing around 1.1MMbbls/d of supply means the market is more balanced over the fourth quarter 2022, and in large deficit over the whole of 2023. We had been expecting ICE Brent to trade in the US$90 area for the remainder of this year and through the first half of next year, before trading back above US$100/bbl in the fourth quarter of 2023. However, this latest action from OPEC+ suggests that there is upside to our current full year 2023 forecast of US$97/bbl. What can counter these cuts? The US administration will not be thrilled with the action taken by OPEC+, particularly given that US mid-term elections are just around the corner. Therefore, in the near term, we could see the US tap its Strategic Petroleum Reserves (SPR). However, with the US having already aggressively drawn down the SPR this year, which has left it at its lowest levels since 1984, there will be limits on much more will be released. Ultimately, OPEC+ can cut output for longer than the US can tap into its SPR. The US administration could also put more pressure on domestic producers to increase output more aggressively. However, we have already seen the US call on domestic producers to do so, yet the rig count has been largely flat since early July. The uncertain demand outlook along with rising costs may be holding some producers back. The OPEC+ supply cut could also put more pressure on the US to work towards an agreement for the Iranian nuclear deal. A positive outcome would mean that Iranian supply could increase by as much as 1.3MMbbls/d, which would more than offset the OPEC+ reduction, although admittedly, it would take some time for Iran to ramp up output if a deal were struck. In addition, there is always the risk that OPEC+ reduces production even further in the event of a nuclear deal. These are all supply-side solutions for the market. Clearly, demand destruction could also help to partly offset these supply cuts, although how much demand destruction we see will really depend on the severity of any upcoming recession. Read this article on THINK TagsSPR Russian oil price cap Russian oil ban OPEC+ Iran nuclear deal Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Market Insights with Nour Hammoury: S&P 500 and Bitcoin Projections for H2 2023

Inflation Report Ahead, What Might It Look Like In The United States (U.S. CPI)?

Kamila Szypuła Kamila Szypuła 08.10.2022 15:52
Recently, we have been watching prices rise every month. Inflation has also hit the US economy. How this time the change in the price of goods and services from the perspective of the consumer can and what it looked like with the last reading. Forecast In August, the Consumer Price Index (CPI) for All Urban Consumers increased 0.1 percent, seasonally adjusted, and rose 8.3 percent over the last 12 months, not seasonally adjusted. The annual inflation rate in the US eased for a second straight month in August of 2022, the lowest in 4 months, from 8.5% in July but above market forecasts of 8.1%. Forecasts for September are the same as for August, ie 8.1%. On Wednesday, September 12, we will know the official results. We can expect that also in September food and energy will become more expensive. Source: investing.com The data presented above shows a general picture, while the division into selected categories is presented in the table below. 12-month percentage change, Consumer Price Index, selected categories, August 2022, not seasonally adjusted Source: https://www.bls.gov/cpi/ Source: U.S Bureau Of Labor Statistics Energy It may be noted that energy prices in August 2022, compared to the same month last year, increased by 23.8%. It was the highest increase among the categories. Crude oil and natural gas prices were already high entering 2022 as rebounding global demand for energy commodities occurred faster than supplies have been able to keep up. But on Feb. 24, prices spiked further following Russia’s invasion of Ukraine. Russia is a major producer and exporter of crude oil and natural gas for Europe. Subsequent sanctions against Russia drove energy prices higher as countries looked elsewhere to purchase their crude oil. In the U.S., crude oil accounts for about 54% of the cost of gasoline at the pump, according to Energy Information Administration data (EIA). The limited supply of this commodity thus drove up the national average for gasoline in the U.S. to over $4/gallon, according to EIA data. This situation mainly affects European consumers, but also American consumers bear costs such as the costs of distillation and transportation. Moreover, it may affect the results of the economic growth of the American economy. Food Compared to August 2021, food prices increased significantly in August this year. For many of us, going to the grocery store is where we really feel this crushing inflation. We see a big price for our groceries lining up at the checkout and then do some calculations in our heads to determine what other things we can sacrifice financially as we have just been hit by a high food bill. For lower-income Americans, the situation is particularly worrying. Soaring food prices are regressive and particularly damaging to them, as they spend more of their after-tax income on food compared to higher-income Americans. In such a situation, they will decide to buy more modest groceries and may not even go to the cinema or not go out to dinner in the city, which may have worse consequences for such people, for example not going to the doctor or not turning on the air conditioning. The increase in prices not only negatively affects consumers, but also manufacturers and entrepreneurs. Food prices also exacerbate labor shortages and government interventions that discourage work and increase labor costs. Summary This is a difficult time for all Americans. The current inflation is acting like a tax on all of us and is damaging our quality of life. Policy makers at all levels of government should be focused on eliminating the many government interventions that drive up prices, including food prices. Instead of fueling inflation, policymakers must remove the policies that contribute to it.
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Europe Remains In The Eye Of The Storm (War In Ukraine And High Energy Prices)

ING Economics ING Economics 09.10.2022 09:17
As the global economy slides into a winter recession, Europe is in the eye of the storm. High energy costs caused by the war in Ukraine and rising interest rates have sent a cold chill through the region, which is only set to get worse. And as ING's Carsten Brzeski explains, there is no easy way out More economic drama for Europe amid global shockwaves As energy prices skyrocket and central banks scramble, Europe currently finds itself at the epicentre of serious global economic shockwaves. With the entire region now sliding into recession and the risk of policy mistakes rising, ING's Carsten Brzeski questions just how severe the downturn could be. The rebound we're likely to see will no doubt be far from traditional, but we're certain of one thing: the current crisis will be a major game-changer for the eurozone. Share    Download article as PDF   The global economy has clearly not turned for the better in recent weeks. On the contrary, our earlier fears of a looming recession seem to have become a reality. All sentiment indicators point to a slowing of the global economy; the only question is how severe this slowdown will be. The deceleration in activity is being driven by high energy and commodity prices but increasingly also by higher interest rates. Let’s not forget that over the last 70 years, the most common trigger for a global recession has indeed been too aggressive monetary policy tightening. It is no surprise that Europe remains in the eye of the storm. The war in Ukraine continues to rage on and the risk of further escalation seems higher than a peace deal being reached any time soon. High energy prices have increasingly found their way into the real economy, denting private consumption, industrial production and shrinking profit margins. The silver lining of filled national gas reserves has recently become clouded again by the stoppage of the Nordstream 1 pipeline and the cold September weather. The risk of energy supply disruptions is back again. Even worse, there is an increasing awareness that high energy prices will not only be a problem for this winter but also for next. While everyone is still assessing the depth of a potential winter recession, another risk has not yet received sufficient attention; the eurozone may be witnessing the end of the business cycle as we knew it. Energy prices are very likely to remain high – very high – in the coming years. This will be a structural, not just cyclical burden on companies’ cost competitiveness and households’ purchasing power. It is a structural shift that could be compared with the deleveraging many eurozone countries saw after the financial crisis and which led to subdued growth for many years. Consequently, the risk is high that the eurozone economy will not experience a V-shaped or U-shaped recovery but rather, a J-shaped recovery. This distinction between a rather traditional cyclical recession and a recession at the start of a structural change is important as it has implications for the right policy answer. Currently, many governments have started to support the demand side of the economy with large fiscal stimulus packages. It is a recipe that worked well during the pandemic. However, the history of previous crises or downturns in the eurozone shows that such fiscal stimulus only works in the absence of structural issues. In the case of highly needed structural change and transition, fiscal stimulus aimed at the demand side of the economy rather runs the risk of delaying change at the cost of surging government debt. It is not easy to be a European policymaker these days. The potential economic fallout of the looming recession could be painful and in a worst-case scenario runs the risk of destroying production capacity for good. At the same time, the European economy is facing a structural energy shock which actually requires a policy answer aimed at the supply side of the economy. Currently, however, most efforts are aimed at the demand side, and monetary and fiscal policy are clearly not in sync. While the European Central Bank is hiking interest rates to fight inflation and inflation expectations, implicitly accepting a weakening of the demand side, governments are actually supporting the demand side. Delivering fiscal stimulus that is both aimed at the supply and demand side of the economy is possible in theory, but in practice, there are clear limits to such stimulus in the form of too high government debt, as the recent market reaction to the UK government’s fiscal stimulus plans showed. An uncomfortable truth is that the current crisis in Europe cannot be quickly and easily resolved. Indeed, it increasingly appears that it cannot be resolved without accepting economic damage. We are bracing for a tough winter.     Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
There Are Risks That An Increase In The Price Of Oil May Provoke China To Limit The Export Of Diesel Fuel

Forecast That The Global Commodities Market Will Likely Be In Deficit

ING Economics ING Economics 09.10.2022 09:29
Commodity markets have come under pressure due to a strengthening US dollar and a raft of central banks hiking interest rates recently. This has clouded the macro outlook. However, the supply picture for a number of commodities remains fragile In this article The OPEC+ put Price caps and price forecasts Even tighter times ahead for European gas Source: Shutterstock The OPEC+ put Oil prices came under pressure in September, with ICE Brent falling by almost 9% over the month and trading to the lowest levels since January. US dollar strength and central bank tightening have weighed on prices and clouded the demand outlook. From a supply perspective, the oil market has been in a more comfortable position. Russian oil supply has held up better than most were expecting due to China and India stepping in to buy large volumes of discounted Russian crude oil. The demand picture has also been weaker than expected. However, we believe there is a good floor for the market not too far below current levels. Firstly, the EU ban on Russian oil comes into force on 5 December, followed by a refined products ban on 5 February. This should eventually lead to a decline in Russian supply, as it is unlikely that China and India would be able to absorb significantly more Russian oil. Secondly, US Strategic Petroleum Reserve releases are set to end later this year. If not extended, we could start to see large drawdowns in US commercial inventories, which are very visible to the market and could provide more support. Potential OPEC+ intervention should also provide a good floor to the market. Already this week, OPEC+ announced a 2MMbbls/d supply cut through until the end of 2023. However, it is important to remember that given OPEC+  is cutting output from target production levels, the actual cut will be smaller given that most OPEC+ members are already producing well below their target levels. Our numbers suggest that the group’s paper cut of 2MMbbls/d will work out to an actual cut of around 1.1MMbbls/d. Price caps and price forecasts As for the proposed G7 price cap on Russian oil, the EU now appears to have agreed on the mechanism. However, once implemented, there is still plenty of uncertainty over whether it will have the desired effect of keeping Russian oil flowing and limiting Russian oil revenues. Without the participation of big buyers, such as China and India, it is difficult to see the price cap being very successful. In addition, there is always the risk that Russia reduces output in response to the price cap. We currently expect Brent to trade largely within the US$90 area for the remainder of this year and into the first half of 2023, before strengthening over the second half of 2023. However, given the large supply cut recently announced by OPEC+, the global market will likely be in deficit through the whole of 2023, suggesting that there is upside to our current forecasts. Even tighter times ahead for European gas European natural gas prices have come off their highs in August, falling more than 40% from the recent peak. Comfortable inventory levels have helped, with storage 89% full already. The EU has also managed to build storage at a quicker pace than originally planned. In addition, intervention from the EU is likely to leave some market participants on the sidelines, given the uncertainty over how policy may evolve. It also appears that the EU is moving towards a price cap on natural gas in some shape or form. Whilst this will offer some relief to consumers, it does not solve the fundamental issue of a tight market for the upcoming winter. We need to see demand destruction in order to balance the market through the high demand months of the winter, but capping prices will do little to ensure this. It will be difficult to get through this period unless we see demand falling aggressively, and this becomes more of a challenge when we see seasonally higher demand. The latest numbers from Eurostat show that EU gas consumption was 11% below the five-year average over July, falling short of the 15% reduction the EU is targeting. In recent weeks, consumption has also come under further pressure as a result of industrial shutdowns. EU gas storage above target levels while demand comes under pressure Source: GIE, Eurostat, ING Research   It is looking increasingly likely that the trend for Russian gas flows is lower in the months ahead. At the moment, the EU is only receiving Russian pipeline natural gas via Ukraine and through TurkStream, and there is the risk that we will see these flows decline as well. Recently, Gazprom warned that Russia could sanction Ukraine’s Naftogaz due to ongoing arbitration. This would mean that Gazprom would be unable to pay transit fees to Naftogaz, which puts this supply at risk. At the moment, volumes transiting Ukraine are in the region of 40mcm/day. Meanwhile, total daily Russian flows via pipeline to the EU are down in the region of 75-80% year-on-year. The EU should be able to get through the upcoming winter if demand declines by 15% from the five-year average between now and the end of March. The bigger concern, however, will be for the following winter in 2023/24. Earlier this year, we saw some decent flows of Russian gas, which helped with rebuilding inventory. Next year, Russian flows are likely to be minimal, which means that the EU may build inventories at a slower pace. We therefore expect to go into winter in 2023/24 with very tight inventories, which suggests the risk of even higher prices over this period. TagsOil Natural gas Monthly Update Energy crisis Energy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Turbulent Times Ahead: Poland's Central Bank Signals Easing Measures

The US Energy Sector Has Delivered The Strongest Earnings Growth

Saxo Bank Saxo Bank 10.10.2022 09:23
Summary:  It will be a huge week for markets with, with equities on a knife edge awaiting key US CPI data and quarterly earnings season kicking off. Without the star-Energy earnings this season, what can you expect? Plus, on the macro front; US inflation data is out on Thursday, as well as the FOMC meeting minutes, which could set the path ahead for US yields and the US dollar. China releases its CPI and financing data, with both expected to rise. In Singapore Q3 GPD data is on tap, while Australia’s economic calendar is light, the focus is on Australian corporate AGMs. US CPI key this week, Fed minutes also due US inflation data out on Thursday be the next catalyst to test the Fed’s pivot narrative, and the path ahead for US yields and US dollar. Headline inflation is expected to fall slightly but stay above 8%. Bloomberg consensus expectations are at 8.1% y/y from 8.3% y/y in August, but the m/m print is expected higher at 0.2% from 0.1% previously. The core measure is also likely to swell further, and come in at 6.5% y/y from 6.3% in August. While market reaction to CPI print cannot be ignored as pricing for Fed’s path remains volatile, Fed members have been clear about their intent to keep rates high until inflation comes down materially. This suggests that even if we see further rate cut pricing for 2023, we will get a stronger pushback from Fed members and the markets will need to revise their thinking eventually. FOMC meeting minutes will be released on Thursday October 13, from the September 21 meeting and will likely continue to send out hawkish signals. China’s aggregate financing data is expected to rise in September China’s New loans, aggregate financing, and money supply data are scheduled to release sometime in this week.  The median forecast of RMB new loans in September as per Bloomberg’s survey is RMB1,800 billion, much above the RMB1,250 billion in August and the RMB1,660 billion a year ago in September 2021. New aggregate financing in September is expected to rise to RMB2,750 billion from RMB2,430 billion in August, but below the RMB2,903 billion in September 2021. The instructions as well as window guidance from the regulators to urge banks to lend to infrastructure projects and industries deemed important to the real economy were likely to have lifted the amount of new loans.  China’s CPI is expected to rise in September China is releasing CPI and PPI data on Friday. The median forecast in the Bloomberg survey is expecting the CPI to rise to 2.9% Y/Y in September from 2.5% Y/Y in August.  The rise is likely to attribute to higher food prices, including pork prices during the month.  PPI is expected to fall to 1.0% Y/Y in September from 2.3% in August, helped by a high base last year.  Singapore’s Q3 GDP and MAS policy decision due this week Singapore reports advance estimate of Q3 GDP, along with the Monetary Authority of Singapore’s (MAS) policy decision, on October 14. Bloomberg estimates suggest some weakening, with the median consensus estimate at 3.4% y/y, from GDP growth of 4.4% y/y in the second quarter. However, q/q growth is expected to turn positive at 0.7% from -0.2% previously, thereby avoiding a technical recession. Inflation, meanwhile, has breached the 7%-mark and broad-based price pressures mean higher-for-longer inflation. This suggests MAS will continue to tighten the monetary policy, and a re-centring of the S$NEER policy band to its prevailing level can be expected. Still, the boost to the SGD may remain limited as potentially more USD gains remain likely for now. If the MAS increases the slope of the band also alongside, that could mean slightly more hawkishness suggesting some near-term gains in SGD. Earnings season kicks off; Here is what to expect this week US Q3 earnings reporting season kicks off this week with several leading US banks revealing results on Friday. The market will focus on JPMorganChase (JPM:xnys), Morgan Stanley (MS:xnys) and Citigroup (C:xnys). The key things to watch are the investment banks ability to increase their net interest margin and if the quality of their loan books have deteriorated or improved. Consumer brands such as Pepsi (PEP:xnas), Walgreens Boots Alliance (WBA;xnas), and Delta Air Lines (DAL:xnys) will also be important earnings to watch, which will give clues as to how the consumer is spending amid the cost-of-living crisis. The three major themes to watch this US Corporate earnings season Firstly; it’s important to reflect that this year the Energy sector has delivered the strongest earnings growth (in Q1 and Q2), which has held up overall S&P500 earnings figures. But now, Q3 Energy earnings will likely buck that trend; with oil earnings likely to fall after the oil price pulled back with the WTI price falling about 24% from July to September. Last week, Shell highlighted it’s bracing for profit-hits from lower refining margins; which could also signal the end of rising profits from oil giants overall in Q3. Shell expects its oil-refining margin to nearly halve to $15 a barrel in the Q3, from $28 a barrel in the prior quarter. Shell is one of the most traded stocks at Saxo this month, with the majority of its transactions last week being sells and or shorts. (For a technical on Shell, click here.) But weaker earnings for energy for one quarter, don’t spell the end of a trend necessarily. So far this month, and quarter (Q4), the oil price has risen ~13%. So if oil continues to move up amid the lack of oil supply fears, Q4 could earnings for energy could shine once more (if oil moves up for the rest of the year that is). Secondly, the other likely theme to play out in Q3, will also be a drop in overall earnings caused by a higher US dollar, and higher wages. Thirdly, unrealistic earnings expectations might not be met  as well, with ‘negative surprises’ to pop up everywhere, as written by Peter here. And finally, when it comes to earnings season, keep in mind a company’s shares can often move if their earnings results and outlook is stronger than expected, or weaker than expected. So keep abreast of the latest Saxo insights.   Key economic releases & central bank meetings this week   Monday, Oct 10 US: Columbus Day - bond markets closed (stock markets opened) Eurozone: Sentix Investor Confidence (Oct)Japan: Health-Sports Day holiday Tuesday, Oct 11 US: New York Fed Survey of Consumer Expectations US: 3-year treasury note auction UK: Labour Market Report (Sep) Japan: Current Account (Aug) Japan: Current Economic Conditions Wednesday, Oct 12 US: PPI (Sep) US: Atlanta Fed Business Inflation Expectations (Oct) US: 10-year treasury note auction US: FOMC Minutes (Sep) UK: Monthly GDP (Aug) UK: Industrial Production (Aug) Eurozone: Industrial production (Aug) Japan: Machinery Orders (Aug) Korea: Bank of Korea meeting India: CPI (Sep) India: Industrial Production (Aug) Thursday, Oct 13 US: Jobless claims (weekly) US: CPI (Sep) US: 30-year bond auction Germany: CPI (Sep-final) Japan: PPI (Sep) Friday, Oct 14 US: Retail Sales (Sep) US: U of Michigan Consumer Sentiment Survey (Oct-preliminary) Japan: M2 (Sep) China: PPI (Sep) China: CPI (Sep) China: Trade Data (Sep) Singapore: Monetary Authority of Singapore meeting Singapore: GDP (Q3) Sometime in the week China: Aggregate Financing (Sep)   Key company earnings releases this week   Wednesday: Pepsi (PEP:xnas) Thursday: Progressive (PGR:xnys), Fast Retailing (9983:xtks), Trivago (TRVG:xnas), Walgreens Boots Alliance (WBA;xnas), Fastenal (FAST:xnas) , BlackRock (BLK:xnys), Delta Airlines (DAL:xnys), Domino’s Pizza (DOM:xlon) Friday: Shanghai Putailai New Energy (603659:xssc), YTO Express (06123:xhkg), PNC Financial (PNC:xnys), JPMorganChase (JPM:xnys), Morgan Stanley (MS:xnys), Citigroup (C:xnys), UnitedHealth (UEEC:xnas), Wells Fargo (WFC:xnys), US Bancorp (USB:xnys) , First Republic Bank (FRC:xnyc) For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-10-14-october-2022-10102022
Conflict Over Taiwan Would Trigger A Huge Global economic Shock

Elon Musk Is Getting Into Geopolitics| Russia And Another Attack

Kamila Szypuła Kamila Szypuła 10.10.2022 13:48
The new week has started and the markets await more important reports. While waiting for new reports, it is also worth getting acquainted with information on other events in various areas that may affect the situation on the markets. In this article: Relevance of the payment Market volatility Another attack Fear and financial risk Musk's proposal The global energy investment How payments affect the brand JP Morgan in its tweet discusses the importance of payments for the brand. The significance of the payment for the brand is wider explained in the attached short video.   Payments power and support shopping in many ways, directly improving overall brand perception. https://t.co/Eooh2EjJLT pic.twitter.com/yfwnxfH28v — J.P. Morgan (@jpmorgan) October 4, 2022 Building a strong brand is a comprehensive and multi-channel process. Creating a strong and meaningful brand should start inside the company. In order to find out what is important for clients, companies ask them to fill in questionnaires. Recently, payment methods have become more important. Understanding how this detail can affect brands can help companies improve their position. What really is the cause of market volatility? UBS in its last post on twitter informs about the topic of the last UBS Trending clip. The main topic is market volatility and what is the cause of this situation.   As US market volatility continues, many investors are wondering what really is the cause of it all? And are there investment opportunities out there? Find out in this episode of #UBSTrending. #shareUBS pic.twitter.com/edhHPLcsOh — UBS (@UBS) October 9, 2022 Volatility can be high or low. The greater the market volatility, the greater the short-term profitability. However, it is often considered that investing in the most volatile currency pairs or other assets is very risky and therefore the risk of loss is high. In times of high market volatility, prices tend to move very dynamically and rapidly in the short term. For investors, knowing the reasons for this may be helpful in making a decision. Russia is still attacking *Walter Bloomberg tweets about Russia's intentions, following a statement by Russian Defense Minister.   RUSSIAN DEFENCE MINISTRY: RUSSIA LAUNCHED MASSIVE ATTACK ON UKRAINIAN MILITARY COMMAND, COMMUNICATIONS AND ENERGY SYSTEMS - RIA — *Walter Bloomberg (@DeItaone) October 10, 2022 The situation on the front line continues to escalate. Russia is still attacking and is planning further attacks. The deepening of the dispute affects not only the geopolitical situation, but also individual citizens. Not only does the lack of peace evoke negative emotions, but there will also be questions about what to do next, prices are rising as a result of the conflict. With the coming winter uncertainty, fears will increase with subsequent attacks. How To Deal With Fear Morningstar, Inc. in his tweet, he discusses the impact of fear on investments. Sarah Newcomb (@finance_therapy) advises on how to manage fear.   Fear can change how you perceive financial risk.As investors, we cannot eliminate risk entirely, so we must instead learn to conquer — or at least manage — our fears, writes @finance_therapy. Here's how: https://t.co/thYiDUVF2c — Morningstar, Inc. (@MorningstarInc) October 9, 2022 We make most bad decisions under the influence of emotions. Financial decisions can have drastic consequences when influenced by them. In the investment world, risk is common, but the associated emotions, such as fear, can distort our perception of the situation. Not only investors, but also every single person should learn how to advise and manage emotions when making decisions. Such a skill can save you from negative consequences. Musk’s idea for China-Taiwan conflict resolution CNBC On Twitter write about Musk's proposal for China-Taiwan.   Musk's proposal for China-Taiwan relations gets slammed: Our freedom is 'not for sale' https://t.co/o3lQaCVHKq — CNBC (@CNBC) October 10, 2022 Elon Musk has stepped into geopolitics once again, suggesting a deal where Taiwan becomes China's "special administrative zone" and Beijing likely has some control over a self-governing island. This suggestion sparked the anger of Taiwanese politicians. Both sides want to resolve their conflict without an armed confrontation. The businessman's statement may spark a storm of controversy. Taiwan wants to remain independent, but China approves of Musk's idea. Uncertainty about the global energy investment BloombergNEF's post discusses the future prospects of the global energy investment   There's considerable uncertainty about the global energy investment required to achieve meaningful decarbonization. The most frequently referenced scenarios offer very different outlooks - so we took a look at each to better understand potential capital flows up to 2050. 🧵 — BloombergNEF (@BloombergNEF) October 6, 2022 It is important to understand the different markets and their prospects in different times. Assessment of what is and may possibly influence subsequent decisions. With the global energy in the world of geopolitical tensions in the spotlight, what is happening now will have a significant impact on the future.
Bank Of England Will Probably Be Unable To Avoid A Significant Easing Of Policy

Bank Of England Is Facing A Difficult Decision |UK Government Energy Price Guarantee Will Change From Next April

ING Economics ING Economics 18.10.2022 13:12
The UK government has announced it will make its energy price cap less generous from April next year. That could add 3pp to inflation for much of 2023, and depending on how the changes are made, could deepen the recession we're forecasting this winter. We now expect a 'smaller' 75bp rate hike from the Bank of England in November In this article The UK Chancellor has reversed much of the ill-fated growth plan Fiscal U-turns give Bank of England a route to less aggressive tightening The UK Chancellor has reversed much of the ill-fated growth plan UK bond markets reacted well to new Chancellor Jeremy Hunt’s announcement that large parts of the so-called "mini" Budget will be reversed. That said, there is undoubtedly further work to be done. For debt to fall as a share of GDP, the government needs to find £72bn a year by 2026/27, according to leaked reports from the Office for Budget Responsibility over the weekend. Recent U-turns have roughly halved that shortfall. That inevitably leaves more to be announced by the time of the 31 October Medium-Term Fiscal Plan. We expect a revenue cap on renewable energy generators, and cuts to public sector investment, to do some of the leg work (we wrote more on the different options yesterday). The Chancellor will also hope the fall in Gilt yields will enable the OBR to lower its estimate of future debt-servicing costs. But by far the most consequential announcement for the UK economy on Monday was that the government’s energy price guarantee will change from next April. At present, this guarantee has fixed consumer gas/electric unit prices such that the average household’s annual bill is capped at £2500 for the next two years. The Chancellor has signalled that will no longer be the case from April, and instead will become more targeted. The government is getting a helping hand from a plunge in gas prices   Source: Macrobond, ING   The fact that the energy guarantee currently applies equally to all households does suggest some room to make the policy more targeted, though in practice that’s complicated. Any policy needs to recognise a) that energy usage doesn’t vary hugely across the income spectrum, but b) it does vary considerably within different income brackets (owing to varying household sizes). At present, the government only really has two ways to means-test its energy price cap. The most obvious option is to offer all households the same energy price but to temporarily raise higher rates of income tax to make the system fairer. That would probably be the most accurate and therefore cost-effective option, but would most likely be politically untenable. The alternative would simply differentiate between those on Universal Credit (welfare benefits) - around 15-20% of energy-using households - and those that aren’t. This is effectively what former Chancellor Rishi Sunak did before the summer. Barring the Treasury finding a more innovative solution, this option could conceivably see most households move back onto the price set quarterly by the regulator Ofgem from April 2023. Using current gas/electricity futures prices, we estimate that the average household electricity bill would total £3700 in fiscal year 2023, peaking at £4250 on an annualised basis between April and June next year. The cost of the energy price guarantee has more than halved   Source: Refinitiv, ING estimates Cost calculation takes the difference between the £2500 cap and our projected estimates of where household bills would be without government support. This is then multiplied by the number of households using electricity/gas (for simplicity we're using the price paid by those on duel-fuel direct debit payment)   This could save the Treasury roughly £25bn in FY2023 and a further £6bn in FY2024, if we make the simple assumption that those on Universal Credit continue to have their bills fixed for the full two years. If that doesn’t sound like that much, it’s because gas prices have fallen considerably in recent weeks. By our estimates, the cost of the household energy cap has more than halved since its inception. Of course, this sort of policy would inevitably come at a cost to both growth and inflation. The chart below shows that inflation would be roughly 3 percentage points higher through much of 2023 if energy prices revert to those set by the regulator Ofgem. Households across the income spectrum would in most cases be spending close to, or in excess of, 10% of their disposable incomes on energy bills in FY2023. That would be 15%+ if energy prices were to return to their August high – and it’s worth saying that our Commodities team forecasts gas prices to end up higher next winter than during the coming one. Inflation could be 3pp higher through much of 2023 if most households revert back to the Ofgem price Source: Macrobond, ING   That kind of hit to disposable incomes would inevitably deepen what would otherwise hopefully be a reasonably mild recession this winter. The Chancellor will be hoping that energy prices continue to fall, lessening the blow to households. Indeed for now his focus is on reducing the OBR’s borrowing estimates as much as possible in its forecast due on 31 October. He’ll also be hoping a scaled-back support package will reduce the need for the Bank of England to tighten aggressively. But in practice – and especially if gas prices start rising again – we think the Treasury may well need to offer extra support in one form or another before April next year. Households could spend around 10% of disposable income on energy without the government guarantee Source: ING analysis of ONS Living Costs and Food Survey, Effects of Tax and Benefits, Ofgem, UK Treasury For simplicity we've used most recent 2020/21 equivalised disposable income data (in practice this will have increased but doesn't materially change the end result). Assumes all households move back to the Ofgem price cap system and that energy prices increase by same percentage for all income deciles. Disposable income = after income tax/national insurance etc but before accounting for housing and other costs Fiscal U-turns give Bank of England a route to less aggressive tightening For the time being though, the moves by the Chancellor will reduce the need for the Bank of England to act as aggressively. Having pencilled in a 100 basis-point rate hike in November, we now think that’s more likely to be 75bp. Markets are still expecting Bank Rate to peak at 5.2% next summer, albeit this pricing has been pared back since the fiscal U-turns. This leaves the Bank with a difficult decision: meet those expectations, and bake in what are now very uncomfortable mortgage and corporate borrowing rates. Undershoot investor expectations, and the pound could fall materially. But in practice a weaker pound – and the extra imported inflation that might bring – is probably more desirable than the current strains that are starting to emerge as a result of ultra-high borrowing costs. The challenge for policymakers will be to gradually talk down market rate expectations without causing abrupt pressure on the currency. Ultimately, we think a 75bp hike in November will be followed by another 50-75bp hike in December. We think Bank Rate will peak somewhere between 3.5-4%.   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

The Aggressive Policy Of The Fed May Harm The Economy

Saxo Bank Saxo Bank 22.10.2022 08:01
Summary:  Winter is coming to the financial markets as central banks are tightening their grip. How will markets be after hibernation? I am sorry to disappoint our younger readers of this Q4 Outlook who think that its title is a play on Games of Thrones. Rather, it’s a reference to the 1970s movie Being There, in which Peter Sellers plays Chauncey Gardiner, a simple gardener who becomes a sensation on Wall Street and as a presidential adviser. Observers misinterpret his basic gardening and seasonal tips as oracular advice—for example, “In the garden, growth has its seasons. First comes spring and summer, but then we have fall and winter.”   This year winter is coming once again for global markets. Winter came already for the crypto market last year and has lingered since the pivot by the Fed in November 2021. And more broadly speaking, the same has been the case for the equity market, save for a brief thaw in the spring of this year and then for a sunny couple of months after the 16th June FOMC meeting. That meeting’s super-size 0.75 percent rate hike had the market hoping that peak Fed would arrive sooner rather than later due to the anticipated damage that the aggressive Fed hiking cycle would do to the economy.  We have argued since early 2020 that inflation would be deep rooted and persistent. This view still holds but we are fast approaching a breaking point for the global economy—one that we’ll arrive at due to the “peak hawkishness” from policymakers over the next quarter or so. Three factors will lead to this breaking point.  First, global central banks realise that it’s better for them to err on the side of excess hawkishness than continuing to peddle the narrative that inflation is transitory and will remain anchored. Second, the US dollar is incredibly strong and reduces global liquidity through the increased import prices of commodities and goods, reducing real growth. Third, the Fed is set to finally achieve the full run-rate of its QT program, which will reduce its bloated balance sheet by up to $95bn per month. This triple whammy of headwinds should mean that in Q4 we should see an increase in volatility at a minimum, and potentially strong headwinds for bond and equity markets.   The question facing investor is really this: If we are set for peak hawkishness in Q4, what then comes next? The answer is possibly that the market begins to price the anticipation of recession rather than merely adjusting valuation multiples due to higher yields. That turning point to pricing an incoming recession, again, could come in December, when the energy prices peak with the above trio.  It's estimated the total share of energy in the global economy has risen from 6.5 percent to more than 13 percent. This means a net loss of 6.5 percent GDP, whether through an increase in prices relative to lower volumes or service output, or however one wants to define it. The loss needs to be paid for by an increase in productivity or lower real rates.   And lower real rates will need to be maintained to avoid the seizing up of our debt-saturated economies. This means that there are really two ways this can play out: higher inflation persists well above the policy rate, or yields fall even faster than inflation. Which one will it be? That will be the critical question.  The odds right now favour another 50-70 bps higher for US and global interest rates, while inflation remains either stuck at high levels or only comes off gradually, meaning risk-off is the most likely outcome during this window of time. But beyond our anticipated peak hawkishness scenario, the market will be champing at the bit to go long risk assets on any sign that policymakers have surrendered in their fight against inflation as the costs of tighter policy become unacceptable relative to supporting the economy and labour markets, and the costs of servicing sovereign debt. The battle is on, but to paraphrase Chauncey Gardiner, before we can have spring we must have fall and winter.   Safe travels, Steen Jakobsen  Chief Investment Officer, Saxo Bank Group  Explore products at Saxo   Source: https://www.home.saxo/content/articles/quarterly-outlook/winter-is-coming-04102022
Inflation in France increased to 6.2%. ING points to "fuel shortages" and food prices

In the European Union share of energy in food producers' costs rose dramatically

ING Economics ING Economics 27.10.2022 12:19
Surging energy prices create uncertainty for EU food producers, although national energy support measures reduce the impact and shield production. Nonetheless, food producers need to reassess their energy strategies because mandatory cuts in energy use can't be ruled out this winter and concerns about longer-term gas supply continue to linger A considerable increase in energy costs for food and beverage manufacturers Back in 2019 when energy markets were still calm, energy had a 2% share in the total costs of food manufacturers in the EU. Given the sharp increase in energy prices, we estimate that the share currently ranges between 7.5-10% (without price caps or compensation). There are also many signals that some food manufacturers have seen their energy bills rise to up to 30% of their total costs. In food processing, activities such as flour milling, baking and fruit/vegetable/potato processing are relatively energy intensive. At this stage, there are large differences between what companies are paying for energy because some still have longer-term fixed contracts, while others had to renew their contracts at much higher rates. Companies that locked in energy prices before 2021 and companies that use other energy sources than gas for generating heat are certainly in a more favourable position. However, differences will become less pronounced in the months ahead as older, lower-priced contracts and lucrative hedges expire and government support measures level out some variances. The Netherlands is an example of how energy costs have become a burden for food producers Energy costs as a share of total costs in food and beverage manufacturing Source: CBS, *estimate ING Research Food manufacturers feel the pinch from second-round effects Besides the direct impact on costs, there is also a pass-through of higher energy prices towards food and beverage makers as they procure many inputs from agriculture and because they need transportation. Agriculture is generally quite energy intensive (see this previous article), and this is especially the case for horticulture under glass and mushroom growing. Energy represented 25% of total costs in Dutch horticulture in 2021 and, based on energy prices in 2022, that share has gone up to more than 60%. When prices of agricultural products go up due to higher energy costs, the food industry has to deal with this as well. This article looks specifically at energy but it’s good to keep in mind that cost increases for packaging materials, agricultural inputs and labour all add to the cost pressure. Energy support measures also help to sustain food production Do we see any signs of a reduction in food production in the EU because of high energy prices? Thus far, food manufacturing output has proven to be quite resilient, aided by the ability to pass on (some of) the higher costs to customers and consumers. This pass-through is illustrated by current double-digit levels for food inflation in the EU (read more in this article). Still, food production data up until August show that production volumes in the food and beverage industry in the EU are higher this year compared to 2021. The long-term trend shows that output volumes are generally not very susceptible to external shocks, apart from a considerable drop at the start of the Covid-19 pandemic. Currently, we see two mechanisms that help to safeguard EU food production. First, international trade and substitution allow food processors to keep facilities running in case European agricultural supplies fall short. High energy prices haven't led to such a situation yet, but earlier this year trade helped to keep up production of spreads and frozen potatoes amid shortages of Ukrainian sunflower oil. Second, food producers also benefit from government support measures aimed at cushioning the impact of high energy prices on companies and consumers. Examples of recent measures that benefit companies include the reduced VAT rate for electricity and gas in Belgium and the Compensation Energy Costs (TEK) in the Netherlands. Meanwhile, measures aimed at consumers are beneficial because they prevent drastic cuts in expenditure on basic needs such as food. EU countries opt for a range of measures to reduce the burden on companies Selection of government support measures in several countries Source: Bruegel, VRT, FAZ, NOS, ING Research Not all support measures are created equal The introduction of all sorts of national energy support measures for companies will temporarily distort competition in multiple ways. This is very relevant as food and beverage is a major export category accounting for almost 270bn euros or 8% of all intra-EU trade. Hence, calls from food industry associations to maintain a level playing field have become louder over the last couple of months. However, differences between countries are likely to grow as some countries have more fiscal room than others. The longer the energy crisis and subsequent support measures last, the greater the chance that they will determine to some extent which companies will weather this storm best. How support measures distort competition in several ways Source: ING Research Energy costs add additional pressure to EU commodities exports In our base case scenario, energy prices in Europe will stay at relatively high levels for several years. Assuming energy support measures to be temporary means that the competitiveness of European food products in global markets will deteriorate to some extent. Still, global demand for calories is strong due to population and welfare growth, although affordability is a growing issue. Our expectation is that the general competitiveness of more premium products such as infant formula, beer or frozen fries will be impacted less. But for staple products such as milk powder, olive oil and pig meat, the EU Commission’s Agricultural Outlook has already signalled a decline in 2022 export volumes. This is attributed to a variety of reasons including high energy, feed and fertiliser costs, plus drought and animal diseases. So while higher energy prices are a factor impacting extra EU exports, it’s not the only factor. On the other hand, the strengthening of the dollar is a driver in the opposite direction and is currently supportive of EU exports. Chance of mandatory gas and electricity rationing poses a major risk Out of seven major EU food-producing countries, the importance of gas as a source of energy is highest in Benelux (Belgium, the Netherlands, and Luxembourg) and lowest in Spain and Poland. On top of that, a large part of the electricity supply in the Benelux comes from gas-fired power plants. Although concerns about gas supplies during this winter have eased somewhat, the possibility of gas rationing is a serious downward risk for companies that use gas for generating heat in their production processes, especially if they have limited options for fuel switching. Food processing plants that use other energy sources, such as coal, oil or woodchips, are currently better positioned and often run at full capacity even though their energy inputs are generally less sustainable. Another risk is that EU member states are supposed to reduce electricity demand during peak hours between 1 December 2022 and 31 March 2023. This could force companies to shift more production toward night or weekend shifts or reduce output in case this is not possible. Food and beverage makers in the Netherlands and Belgium are most dependent on gas Used energy sources in terajoule in the food, beverage and tobacco industry, 2019 Source: Eurostat, ING Research High energy costs will lead to some substitutions on our plate Elevated energy prices add to food inflation and the current level of food inflation leads to various shifts in food consumption. Such shifts range from an increase in shopping at discounters and higher market shares for private label products to a rebalancing between portion sizes of expensive protein and less expensive carbohydrates in restaurants. The impact of high energy prices might be best visible in the fruit and vegetable section in supermarkets. Here there will be all sorts of substitution effects on display this winter. Due to more energy-intensive processing, conserved and frozen vegetables are becoming less competitive compared to fresh vegetables. On top of that, growing tomatoes, cucumbers and peppers has become a lot less attractive this winter for many horticulture growers in northwestern Europe. If they leave their greenhouses empty, retailers are likely to source more vegetables from growers in Spain, Italy, Morocco and Turkey. These products need less energy to grow, but still require more expensive diesel to transport. In turn that could mean that some consumers will revert to other types of vegetables that provide more value for money. Prices for processed vegetables have increased more than for fresh vegetables Dutch consumer price index 2015 = 100, monthly data Source: CBS, ING Research The situation creates a need for companies to reassess energy procurement and related investments Contingency planning is likely to be a major talking point in strategy discussions for 2023 and beyond. For food manufacturers, reducing their output on short notice is often not easy. This is especially true for companies that have contracted a certain volume of agricultural inputs or for cooperatives that are obliged to purchase milk, animals or crops from members. On top of that, if they reduce output they risk losing contracts and customers which is an even bigger threat to business continuity. While EU farmers are considered to have more flexibility in deciding to reduce production, they generally have high fixed costs meaning that even in unfavourable market conditions they will often decide to ‘plough on’. Follow-up actions that food manufacturers take to cope with high energy prices: Optimise energy use and energy costs: this can be done with additional measures to save energy or by shifting some production to facilities with the lowest energy costs. The latter only works for larger companies with multiple sites that have spare capacity, and only if transport costs allow it. Adapt contracts to reduce energy price risks: price escalation clauses can be a way to pass on energy price increases to customers, but often only work when customers are very dependent on a certain supplier or are working with strategic partnerships focused on long-term continuity. Fuel switching in production processes to reduce dependency on gas: increase of own energy production. For example, with investments in solar panels or biogas installations. Increase electrification efforts: for example, through the installation of electric boilers or heat pumps. In some cases, companies have plans in place but are faced with local capacity constraints on electrical grids. Why it's wise to prepare for another difficult winter in 2023/24 This year, the EU has been able to fill gas storage to the current levels partly because there has still been Russian gas available. Futures markets now seem to be concerned about next winter and Europe’s ability to build stocks without the Russian gas supply. In the event of an ongoing supply squeeze, it can be a burden for food manufacturers with many newer or retrofitted food production plants having been catered to run on gas over the past decade. Such concerns provide a clear incentive for food companies to rethink their longer-term energy strategies, including aspects such as contracting energy supply, the optimal energy mix and related investments. Read this article on THINK TagsInflation Food & Agri European Union Energy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oil Prices Soar on Prospect of Soft Landing, Eyes Set on $80 Breakout

The Q3 Earnings Season Has Been Bad | Cyber Security Stocks Has Bad Week

Saxo Bank Saxo Bank 06.11.2022 09:43
Summary:  The cyber security industry is still growing fast with revenue up 26% from a year ago, but this week's earnings releases from cyber security firms have been an ugly affair with the outlook disappointing. Our cyber security basket is down 11% over the past week as market expectations have clearly been too high relative to what the industry can deliver in the short-term. In today's equity note we also cover next week's earnings releases which will shift to a lower gear as the Q3 earnings season is fading. The most exciting earnings next week are from Activision Blizzard, Walt Disney, Adidas, and ArcelorMittal. A nasty week for cyber security stocks as earnings focus fades The past week has been brutal for cyber security stocks, one of our most popular equity theme baskets, down 11% despite Q3 earnings hitting estimates and maybe a slight hint of growth slowing. Our cyber security basket is down 38% from the peak compared to only 22.5% for the MSCI World as higher equity valuations have made cyber security stocks more vulnerable to higher interest rates, but since 2015 the returns on cyber security stocks have still been much better and we expect the long-term return over 10 years to exceed that of the overall equity market based on high demand for cyber security services and products amid the ongoing war in Ukraine and rising geopolitical tensions. If we look at our basket we can see that among the big players it was Fortinet that saw the biggest hit down 20% over the past week. The company’s Q3 revenue and EPS were both above estimates while fiscal year billings, the forward looking indicator on sales, were revised down a bit, but even worse the company said that it will stop providing this metric in the future. These decisions are often viewed badly by investors as it indicates that the company’s growth is slowing down. Among the minor players in the industry, Varonis Systems shares were down 37% over the past week as the Q4 outlook on revenue at $139-142mn missed estimates of $156mn. So while industry growth is still high at 26% compared to a year ago market expectations are clearly too high at this point acting as headwinds on price performance. The Q3 earnings season has been bad relative to expectations with S&P 500 earnings missing estimates (see chart) as margin pressures have been more intense than expected by analysts offsetting the higher revenue growth. The most intense margin pressure has been observed in industries such as media & entertainment, banks, utilities, semiconductors, and real estate, while industries such as energy, insurance, transportation, retailing, and software have all maintained or expanded their operating margin. Next week’s earnings releases The Q3 earnings season is shifting into a lower gear now but next week will still offer plenty of interesting earnings releases. On Monday our focus is Activision Blizzard which is struggling with negative top line growth like the rest of the gaming industry as the pandemic boom is over. Analysts are expecting revenue growth of -17% y/y and EPS of $0.50 down 39% y/y. Walt Disney is next week’s biggest earnings release scheduled on Tuesday with analysts expecting Q4 (ending 30 September) revenue growth of 15% y/y but EBITDA at $3bn down from $3.86bn in Q3 highlighting the ongoing margin pressure. Adidas, reporting on Wednesday, is also key due to its size in consumer goods but also because of its costly partnership breakup with Ye; analysts estimate revenue growth up 13% y/y but EPS at €1.24 down 47% y/y due to one-off items. On Thursday, we will focus on ArcelorMittal, because Europe’s largest steelmaker is an important macro driver, and analysts are getting increasingly negative on the steel industry expecting ArcelorMittal to announce a 14% drop in Q3 revenue and 66% drop in EPS. The week ends with Richemont expected to see revenue growth coming down fast to just 7% y/y in Q3. Monday: Westpac Banking, Coloplast, Ryanair, Activision Blizzard, BioNTech, Palantir Technologies, SolarEdge Technologies Tuesday: Bayer, Deutsche Post, KE Holdings, Nintendo, Walt Disney, Occidental Petroleum, Lucid Group, DuPont Wednesday: National Australia Bank, KBC Group, Genmab, Siemens Healthineers, E.ON, Adidas, Honda Motor, Coupang, Rivian Automotive, Roblox, DR Horton, Trade Desk Thursday: Brookfield Asset Management, Fortum, Engie, Credit Agricole, Allianz, Merck, Hapag-Lloyd, RWE, SMIC, Nexi, AstraZeneca, ArcelorMittal, Siemens Gamesa Renewable Energy, Becton Dickinson, NIO Friday: Richemont Source: https://www.home.saxo/content/articles/equities/earnings-season-fades-with-cyber-security-stocks-in-big-plunge-04112022
Central Banks' Rates Outlook: Fed Treads Cautiously, ECB Prepares for Hike

Gas And Power Prices Need To Normalise For The Production Of Synthetic Fuels To Take Off

ING Economics ING Economics 24.11.2022 12:13
Corporate leaders are looking at how synthetic fuels can set their companies on a path to net zero emissions. This is far from easy as they are faced with economic and environmental trade-offs. That’s why we have presented eight insights to help them get it right. Hydrogen's exposure to the energy crisis and the 'greenness' of hydrogen are big challenges In this article Eight insights for corporate decision-makers Synthetic fuels offer a key pathway to a net zero economy Synthetic fuels provide corporate decision-makers with a tool to go beyond carbon offsetting Hydrogen production has not been immune to the energy crisis At current carbon prices green hydrogen is not cost competitive with grey and blue hydrogen Green hydrogen is currently also more expensive than fossil fuels It is not economical to produce green hydrogen only at times when solar and wind power are in abundance Green hydrogen produced with electrolysers is not necessarily green(er) A future for hydrogen: technological progress helps, but gas and power prices need to come down first Conclusion   Eight insights for corporate decision-makers Despite all the buzz around synthetic fuels and government support for it (for example in the US and the Netherlands) the economics are far from easy. High gas and power prices have worsened the business case lately, especially in continental Europe. At the same time, synthetic fuels are positioned as a way to replace Europe’s gas and oil dependency in the future and as a means to radically reduce emissions.   In this article, we analyse the role of synthetic fuels in a net zero economy and unravel the economic value drivers of the hydrogen business case, which is the most promising and best-known fuel. We take a European perspective. In doing so, we present eight key insights for corporate decision-makers in energy-intensive companies that can help them build the case for synthetic fuels. But first things first; what are synthetic fuels?   What are synthetic fuels? Synthetic fuels are liquid fuels that have the same properties as fossil fuels but are produced artificially in a non-fossil way. Synthetic fuels are entirely produced in a factory or chemical plant environment, rather than extracted from the earth and therefore, ideally, do not involve oil, coal or gas mining. So while hydrogen can be produced from natural gas (which is extracted), it can also be produced by splitting water with an electrical current (which is a chemical process called electrolysis). Both types of hydrogen share the same features and applications, but the one that splits water into hydrogen and oxygen is entirely free of fossil fuels if it is produced fully with renewable power. If so, its use does not create carbon emissions. Synthetic fuels can also be made from syngas, which is a combination of carbon oxide (CO) and hydrogen (H₂). Reacting these two substances under specific conditions (temperature, pressure and catalyst) results in synthetic fuels such as gasoline, diesel, gas, or even kerosene. Electrolysis and syngas reactions are both chemical processes that yield synthetically produced fuels instead of fossil fuels that are extracted from the earth. 1Synthetic fuels offer a key pathway to a net zero economy Corporate decision-makers around the world have been encouraged by government pledges to reduce greenhouse gas emissions to net zero by mid-century and the financial incentives that come with it (think of hydrogen subsidies and infrastructure). According to the International Energy Agency (IEA) around 70% of global carbon emissions are now covered by net zero pledges. As a consequence, the use of synthetic fuel needs to increase in energy-intensive sectors towards 2050, particularly in transportation. Synthetic fuels are likely to grow towards 2050, particularly in transportation Share of synthetic fuels in the global sector energy mix in the IEA Net Zero Scenario ING Research based on International Energy Agency   According to the IEA, synthetic fuels are not the holy grail to decarbonising energy-intensive sectors in the sense that they alone will fully substitute fossil fuels and reduce emissions. Other technologies such as electrification, bioenergy and carbon capture and storage also play an important role. But, synthetic fuels certainly add to the solution, especially in transportation sectors like aviation and shipping. They can become one of the many building blocks of a net zero economy, provided that corporate leaders, politicians and scientists get the business case and technologies right. That’s why this article unravels the economic drivers of the business case. 2Synthetic fuels provide corporate decision-makers with a tool to go beyond carbon offsetting The climate strategies of carbon-intensive companies often rely heavily on carbon offsetting strategies. But these come with many drawbacks and enable companies to continue to emit vast amounts of emissions as long as they pay someone else around the globe to make up for it, for example, by planting trees or preserving existing forests. A growing number of corporate leaders are now fundamentally rethinking their climate strategies and aiming to become net zero emitters by 2050, according to the Science Based Target Initiative. The key is to radically reduce the company’s carbon emissions, even if this requires a fundamental change to the way they do business. Synthetic fuels are an example of fundamental change, as these can be used in many sectors without creating local emissions. For example, only water vapour is emitted by burning hydrogen in ships, aeroplanes, trucks or cars. The same applies to burning hydrogen in factories and houses to generate heat. So as long as the production of hydrogen is low in emissions (think of green hydrogen production with electricity from wind, solar, hydro or nuclear plants), the lifecycle emissions of hydrogen are much lower than fossil fuels. Synthetic fuels, like hydrogen, have gained a cult status among many industry leaders and politicians as a result. In the remainder of this article, we focus on hydrogen as it is the best-known synthetic fuel and can be applied in many sectors. Hydrogen is the best known synthetic fuel and can be used in many sectors Potential use of different synthetic fuels in sectors ING Research 3Hydrogen production has not been immune to the energy crisis Hydrogen production comes in three forms with a colour attached to each of one. Grey hydrogen is produced from natural gas and the emissions are not captured and stored. Hence the gas and carbon price are the main value drivers of the business case. That is also the case for blue hydrogen where most emissions are captured and stored. As a result, the business case of blue hydrogen is less impacted by the carbon price. Finally, green hydrogen is made with electrolysers that run on electricity. Therefore, the power price is the major value driver of the business case for green hydrogen. To sum up, hydrogen is made with natural gas or electricity where prices change over time, particularly during an energy crisis such as the one seen in Europe this year. Cost of hydrogen production depends on gas and power prices Indicative unsubsidised cost of hydrogen in Europe per kilogram at a carbon price of 75 €/ton ING Research   The energy crisis has had a severe impact on hydrogen production costs through higher natural gas and power prices, particularly in Europe. In the Netherlands and Germany for example, the cost of hydrogen production has skyrocketed as gas prices went from an average 20 €/MWh in the years before the crisis to a peak of 350 €/MWh this summer. Power prices increased from 40 €/MWh to a peak of 700 €/MWh in the Netherlands and even 1,000 €/MWh in France. The cost to produce hydrogen reached record levels on the back of skyrocketing energy prices and hydrogen production was scaled down as a result. For example, Yara produces hydrogen out of natural gas for its ammonia and fertiliser production and curtailed production at its Ferrara (Italy) and Le Havre (France) plants. Energy crisis pushes hydrogen production costs higher Indicative cost of hydrogen production in Europe in €/kg at realised TTF-gas and APX-power prices ING Research based on energy prices from Refinitiv   Both gas and power prices have fallen rapidly recently. Ample LNG supply could not be stored as gas storage facilities in Europe are almost completely filled. On the demand side, the heating season has not kicked in as weather temperatures have been unusually high for this time in the season. This combination of lower-than-expected demand and ample supply caused gas process to fall below 50 €/MWh and power prices below 100 €/MWh. Still, the market expects this to be short-lived. The futures markets indicate gas prices of around 125 €/MWh throughout the winter and power prices of over 300 €/MWh depending on the month of delivery. Hydrogen production costs will move again towards 5-6 €/kg for grey and blue hydrogen and around 15 €/kg for green hydrogen if these expectations materialise.   Although hydrogen is often touted as a solution to becoming less dependent on fossil fuels, the economics are still driven by the gas market. This also holds for green hydrogen as gas is likely to remain the price-setting technology in many power markets in the coming years. 4At current carbon prices green hydrogen is not cost competitive with grey and blue hydrogen In Europe, carbon prices are the main mechanism that drives the environmental competitiveness of the three types of hydrogen. Before the energy crisis, blue hydrogen in general was cost competitive with grey hydrogen at a carbon price above 60 euro per ton CO2. That provided hydrogen producers with an incentive to apply carbon capture and storage (CCS) to hydrogen production and it was expected that they would switch from grey to blue hydrogen production once CCS infrastructure was in place. That no longer holds for current gas and power prices. In fact, grey hydrogen is currently the cheapest form of hydrogen at any carbon price below 150 euro per ton CO2. And green hydrogen is almost three times as expensive as grey and blue hydrogen at the current carbon price and state of technology. Despite initiatives to strengthen the European carbon market, fears of a recession are likely to continue to weigh on carbon prices. With high energy prices, the carbon market won’t offer a decisive push towards less polluting blue and green hydrogen. Grey hydrogen is the cheapest form of hydrogen production at current carbon prices Indicative unsubsidised production costs* of hydrogen in Europe in €/kg for different carbon prices   The public debate for a net zero economy often assumes that hydrogen production will be green, both explicitly and implicitly. Governments also tend to focus on green hydrogen in their vision for a hydrogen economy or net zero pathway. But production of green hydrogen in Europe cannot compete with blue and grey hydrogen at current energy and carbon prices. 5Green hydrogen is currently also more expensive than fossil fuels At current market prices, green hydrogen is also not cost competitive with fossil fuels. Based on the energy content of fuels, green hydrogen is more than twice as expensive as coal and gas and almost seven times as expensive as oil. Fossil fuels are not only cheaper, they are also performing better on important chemical characteristics, such as voluminous energy density. Many synthetic fuels, like hydrogen, are very light and voluminous substances, so they require a lot more space to store and use. That puts them at a disadvantage over fossil fuels when used in aviation, shipping, trucking and cars when it comes to the adjustments of the vehicles (large storage tanks) and the infrastructure required to run on these alternative fuels. Fossil fuels are still cheaper, particularly compared to green hydrogen Indicative unsubsidised production cost* of energy carrier in Europe in euro per GigaJoule ING Research based on energy prices from Refinitiv   Corporate decision-makers in energy-intensive companies are exploring the option of synthetic fuel to reduce emissions and get to net zero. This does not mean green hydrogen will win out, however, as companies have to manage costs, too. In practice, green hydrogen will be in competition with other fuels. Fossil fuels are considerably cheaper and even within the hydrogen space, grey and blue hydrogen are cheaper. The adaptation of green hydrogen in the coming years will largely depend on the extent that governments are inclined to subsidise the price gap to help the industry scale. 6It is not economical to produce green hydrogen only at times when solar and wind power are in abundance Solar panels and wind turbines are perceived as the pillars of the electricity mix in a net zero economy. Green hydrogen production is often presented as a solution to absorb an oversupply of solar and wind power on windy and sunny days when power prices are low. That could well be the case from a technical point of view. However, from an economic perspective electrolysers need to run all year round, 24/7, in order to reduce hydrogen costs. Moments of surplus wind and solar power are still quite rare, even in power systems dominated by solar panels and wind power. Experts indicate that it is limited to 5% in 2030 and 20% of the time in 2050. If one runs electrolysers only in times of surplus solar and wind power, hydrogen production costs would increase by 2 €/kg (+17%) in the current market environment with high power prices. The economics and runtime of electrolysers are even more important in normal market conditions. At historic power prices of 40 €/MWh, an electrolyser that operates on low runtimes (around 20%) produces hydrogen that is twice the cost (+100%) when the electrolyser runs all year round (95% runtime). Higher electrolyser load factors lower hydrogen costs Indicative unsubsidised production cost* of green hydrogen production in Europe for different runtimes of an electrolyser (load factor) in €/kg/H2 ING research   There is another reason why solar panels and wind turbines are mentioned a lot with respect to green hydrogen. Why would one pay high market power prices of 300 €/MWh or more, when the life cycle cost of electricity from renewable assets is often well below 100 €/MWh? The power costs are much lower if an owner of an electrolyser invests in solar panels or wind turbines to directly power the electrolyser. And this is a valid question too if one buys electricity from the power markets, now that the European Commission has capped the power price from renewables at 180 euro/MWh in the day ahead market. Renewables offer a way of becoming less dependent on high market power prices. But, capitalising on lower power prices from renewables is difficult for three reasons; Increasing the runtime of electrolysers often also requires the use of grey power from the grid (see above). The proposed price cap only applies to the day-ahead market on which approximately 20-30% of the power is traded. So, most of the power is not subject to the price cap. European power generators, also the ones with solar and wind assets, tend to pre-sell about 80% of their future power production in one-year ahead futures contracts or through Power Purchase Agreements (PPAs). PPAs are designed to buy green power at fixed prices for longer periods, so hydrogen producers can use PPAs to lower power costs. That works in theory. In practice, PPAs are often linked to a power price index, so power prices from renewables still go up in times of crisis. And the length of PPAs is typically only a couple of years, so it is hard to fix the power price at the levelised cost over the entire lifecycle of the electrolyser, which lasts about 20 years. Clean power is much cheaper compared to current market prices, also because some of it is capped by the EU Indicative unsubsidised cost* of low carbon power sources in Europe in €/MWh ING Research based on Bloomberg New Energy Finance (BNEF)   Corporate decision-makers face a trade-off in the economics of electrolysers between high fixed costs at low load factors and higher electricity costs at high run times. Ideally, one would like to run electrolysers on clean power from solar panels and wind turbines at all times. But an electrolyser that only runs on cheap power from renewables is simply not economical as it cannot recoup the high capital costs. The economics of an electrolyser incentivise corporate decision-makers to maximise the run time of an electrolyser to lower the cost of green hydrogen. This often requires that electrolysers are also run by power from the grid, that at times may not be so green and powered by gas or coal-fired power plants. Sourcing renewable power through Purchasing Power Agreements in practice is only a partial solution. 7Green hydrogen produced with electrolysers is not necessarily green(er) Powering electrolysers to produce hydrogen requires a great amount of electricity. As aforementioned, electrolysers must run constantly in order to lower production hydrogen costs. In practice, this means that electrolysers run on power from the grid too, especially at times when the sun is not shining and the wind is not blowing. This could come with the downside of higher emissions, as power from the grid can be generated from coal or gas-fired power plants. Grey hydrogen emits approximately 8.1 kilograms of CO2 per kilogram of hydrogen. When corporate decision-makers decide to use green hydrogen instead, they must carefully analyse whether this will lead to a decrease in the company's emissions. This is not an issue if one uses nuclear or hydropower (think of connecting an electrolyser to the grid in France or Norway). Green hydrogen will have lower emissions compared to grey hydrogen, even if the electrolyser is fully powered by the grid. However, in countries with a lot of coal-fired power plants (like Poland), green hydrogen only comes with lower emissions if more than 85% of the power comes from renewables, which is unrealistically high. In countries with a lot of gas-fired power plants (like the Netherlands) hydrogen produced with electrolysers only comes with lower emissions compared to grey hydrogen if approximately 60% or more power comes from renewables. A countries’ power mix determines whether green hydrogen comes with lower emissions than grey hydrogen Indicative emission intensity in kgCO2/kgH2 for hydrogen produced with electrolysers in Europe for different amounts of power they take from the grid ING Research   So in order for green hydrogen to be truly green, a vast amount of renewable power is needed. It is estimated that global hydrogen production by 2050 would require 18 times the amount of current solar power and eight times the amount of current global wind power.   Corporate decision-makers face an incentive to run electrolysers 24/7 year-round to minimise the cost of hydrogen. That requires the use of grid power which could make green hydrogen more polluting than grey hydrogen. Sourcing green power from an energy company looks good on paper, but still requires the electrolyser to run on ‘dirty’ grid power at times when the sun is not shining and the wind is not blowing. In practice, the emissions level of green hydrogen changes continuously based on the type of electricity that is used. A company’s decision to use green hydrogen should always be accompanied by decisions about a company’s power mix in order to guarantee a positive climate impact. In other words: company leaders have to tackle hydrogen emissions before they can position hydrogen as a viable net zero solution. This is the reason why the European Commission is setting standards and labels for green hydrogen. 8A future for hydrogen: technological progress helps, but gas and power prices need to come down first While hydrogen is currently very expensive, especially in Europe, there are two main drivers that are likely to significantly reduce the cost towards 2050. Like every crisis, the current energy crisis won’t last forever. Experts from Bloomberg New Energy Finance and Aurora Energy Research expect European gas and power prices to find lower equilibrium levels from 2025 onwards. That’s well before 2030, the year that many government policies target the hydrogen economy to really take off. The energy crisis does have a long-lasting impact though as long-term gas and power prices are expected to be 75% higher compared to past averages. Technological progress will reduce the cost of electrolysers and increase electrolyser efficiency. According to Bloomberg New Energy Finance, investment costs for PEM electrolysers will drop by over 90% towards 2050, from 1200 €/kW today to just 95 €/kW by 2050. Also, electrolyser efficiency is expected to increase from an average of 70% today to 80% by 2050. Electrolysers will use less power to produce a kilogram of hydrogen in the future as a result. Electrolyser technology is still in its infancy but is expected to see similar cost declines as solar panels and wind turbines have shown in the past. Lower gas and power prices are the main source of declining hydrogen costs Indicative unsubsidised levelised cost of hydrogen in €/kg (real prices) ING Research based on Refinitiv, IEA, BNEF and Aurora   Before the energy crisis, IRENA estimated that by 2050, hydrogen production costs in the northwest European region would be around €1.0-€2.0/kg. That seems no longer the case if the current energy crisis has a long-lasting impact on energy prices. According to Bloomberg New Energy Finance and Aurora, new equilibrium levels for gas and power prices are likely to be 75% higher compared to pre-crisis levels. In such a world, hydrogen production costs will be more in the range of 2.5-€3.0/kg, with green hydrogen still being the most expensive option. But predicting gas and power prices is notoriously difficult. The energy crisis might also speed up the energy transition and phase out fossil fuels much faster, which might lower long-term gas and power prices. The IEA hints in that direction in its 2022 World Energy Outlook. That’s why we will monitor energy markets closely in the years ahead and continue to assess the impact on the economics of synthetic fuels.   Before the start of the energy crisis, innovation was considered the biggest driver of lower hydrogen costs towards 2050. It still has a role to play, but lower gas and power prices have a much bigger impact now that Europe is facing an unprecedented energy crisis. Conclusion Currently, the production and use of synthetic fuels like hydrogen are often done by one company or within a specific cluster of companies in the chemical sector. Unfortunately, this is far from easy as producers are faced with many economic and environmental trade-offs, such as high energy prices, high technology costs and a shortage of renewable power. That’s why we’ve presented eight insights that corporate decision-makers need to know about synthetic fuels, so they can make them work. Our analysis shows that gas and power prices need to normalise for the production of synthetic fuels to take off. Now corporate leaders in many other sectors are looking at how synthetic fuels can set their companies on a pathway to net zero emissions by 2050. The use of synthetic fuels: holds the potential to fundamentally change the business towards net zero emissions; provides energy-intensive businesses a license to operate in a low-carbon world and gain support from society could reduce fossil fuel dependency and supply chain disruptions. In future articles, we will shift the focus from the production side of synthetic fuels towards the use case of synthetic fuels in transportation, manufacturing and buildings.
Nuclear Power Emerges as Top Theme for 2023, Bubble Stocks Under Pressure

Alberto Gandolfi Statement About Renewables Energy Sources| What To Expect From 2024?

Kamila Szypuła Kamila Szypuła 30.11.2022 11:35
Markets are constantly changing, economic and political situations exert influence on them. Understanding them is very important, and getting acquainted with important events or statements about their team can help in making decisions. In this article: What can bring 2024? UBS Year Ahead 2023 Renewables in Europe The housing market The price of energy insecurity 2024 ahead and what else? Morgan Stanley tweets about the difficulties facing Europe next year. As we head into a new year, Europe faces multiple challenges across inflation, energy and financial conditions, meaning investors will want to keep an eye on recession risk, the ECB, and European equities. https://t.co/0Wtj18Dmbj pic.twitter.com/ImPUGRiuhd — Morgan Stanley (@MorganStanley) November 29, 2022 The new year is approaching. Everyone plans changes, makes resolutions. However, this does not change the fact that the economic situation or the economy will change so suddenly. Therefore, when making their plans, especially Europeans, they should take into account how the geopolitical and economic situation may affect them. And to make this possible, it is worth getting acquainted with the possible scenarios for the next year. We can expect that the fight against inflation will continue, and difficulties on the energy market will also be an important aspect of economic decisions of countries. Stocks and bonds UBS discusses stocks and bonds in their tweet. Is the worst over for stocks and bonds? Or will the years ahead remain challenging? Find out what we think will drive markets in the decade ahead in our UBS Year Ahead 2023: https://t.co/pro4XIuBiG#shareUBS pic.twitter.com/dzcbPOfp7f — UBS (@UBS) November 30, 2022 There is no doubt that the stock and bond markets have had a crazy year. Investors, analyzing the situation, wonder whether the stock and bond markets can expect an improvement or rather a deterioration of the situation. UBS analysts are also looking at this. Their opinion is presented in UBS Year Ahead 2023, and getting to know its results can help investors. Renewables in Europe Goldman Sachs tweets about renewables in Europe. Our head of European utilities research, Alberto Gandolfi, discusses Europe's headstart when it comes to renewables in the utility sector at our #Carbonomics Conference. Listen here: https://t.co/6r5Au9dZ70 #GSsustainability — Goldman Sachs (@GoldmanSachs) November 29, 2022 Alberto Gandolfi, head of utilities at Goldman Sachs, speaks to CNBC’s Steve Sedgwick at the Goldman Sachs Carbonomics event in London mostly about renewables in Europe. According to him, Europe has great potential in this area. The fight for a better tomorrow for future generations is still going on. Renewable energy sources are an important aspect of this. While all non-renewable energy sources: coal, gas or oil, will eventually run out and their further extraction will be impossible, energy obtained from renewable sources is a permanent and reliable source that will never run out. Thanks to this, we can count on safe and predictable energy supplies, without risk. Real estate market Morningstar, Inc. tweets about the real estate market. As the housing market moves into uncharted territory, advisors can help clients feel more comfortable making big financial decisions like buying their first home or refinancing their current one. Join us on December 8th: https://t.co/t5cDNyfB3G #AdvisorPracticeAccelerator pic.twitter.com/ZQ5daEeAJu — Morningstar, Inc. (@MorningstarInc) November 29, 2022 The housing market is important not only for the economy but also for potential buyers. Getting acquainted with it, better understanding it may help in making investment decisions. As the value of the property changes, opportunities arise and advisers can put this knowledge into practice. The price of energy insecurity IMF tweets about the price of energy insecurity. Europe is learning the hard way what happens to an economy tethered and dependent on fossil fuels, writes Bob Keefe. Read our latest Finance & Development for more on the price of energy insecurity: https://t.co/CqabcSqcQw pic.twitter.com/ZpfCi22opn — IMF (@IMFNews) November 29, 2022 Climate change is an environmental issue. This is also clearly an economic issue, and at the heart of the economics of climate change is energy security. The rippling impacts of climate change and the effects of energy security have been sweeping through the global economy throughout 2022, leaving few safe havens from the climate-related economic storm. especially when the supplies are controlled by the Russian dictator. Of course, energy insecurity – and the economic disasters it causes – is just one of the countless side effects of climate change hitting our wallets. How to fix it? Are renewable energy sources the answer? Find out from this tweet.
Agricultural Commodities Markets Are Going To Remain Sensitive To Developments In The Russia-Ukraine War

Agricultural Commodities Markets Are Going To Remain Sensitive To Developments In The Russia-Ukraine War

ING Economics ING Economics 30.11.2022 14:04
2022 has been an extraordinary year for commodity markets. Supply risks led to increased volatility and elevated prices. However, demand concerns have taken the driving seat as we approach year-end. 2023 is set to be yet another year of uncertainty, with plenty of volatility Shutterstock   Russia’s devastating invasion of Ukraine has been a key driver for commodity prices this year. Russia’s willingness to use energy as a weapon and retaliatory sanctions on Russia from the West have had an impact not just on the commodities complex, but the broader global economy. As a result, what started out as concern over supply has now moved more towards growing demand risks as central banks around the world tighten monetary policy in a bid to rein in rampant inflation. Clearly, the longer and more restrictive policy is from central banks, the more downside there is to demand. In addition, whilst much of the world has finally moved on from Covid, key commodity consumer, China, continues to follow a zero-Covid policy. While the government eased quarantine restrictions in recent months, China is facing its largest outbreak of Covid since the start of the pandemic, which clearly does not help the demand picture. In addition to the impact of Covid restrictions, the metal-intensive property market in China remains very weak. Up until now, support from the government has had little impact. It is yet to be seen how helpful the latest measures from the government will be. We will be entering 2023 with markets trying to gauge the demand impact from slowing global growth. It is clear that a number of key economies will enter recession, the big question is how severe. When you couple these concerns with the ongoing weakness in China it is likely that demand will continue to dictate price direction through the early part of 2023. A turning point for the complex would likely be when we see the US Federal Reserve pivoting towards a more accommodative policy (which would also suggest we have seen the peak in the US dollar), but for that to happen, we need to see some clear evidence of a significant fall in inflation. While demand risks are in the driving seat for now, supply risks have certainly not disappeared. In fact, these risks are growing for 2023, particularly when it comes to energy. For oil, the global market will need to see a further change in trade flows as the EU ban on Russian crude oil and refined products comes into force. While other buyers will be keen to pick up discounted Russian oil, their ability to do so is likely limited, which suggests that we see Russian oil supply falling over the course of 2023. This coupled with OPEC+ supply cuts suggest a tighter oil market. Therefore, prices should strengthen over the course of the year. The European natural gas market has seen a massive amount of disruption this year, as Russia cut off the bulk of supply to the region, leading to significant volatility and record-high prices. Demand destruction along with increased LNG imports have helped offset Russian supply losses. For 2023, the EU will likely find it much more difficult to refill storage to adequate levels ahead of the 2023/24 winter. Russian supply losses will be more pronounced and there are limits to how much more LNG Europe can import. Therefore, we will need to see continued demand destruction through 2023. In order to see this demand destruction, prices will have to remain at elevated levels. Tightness in the market also means that volatility is not going to disappear anytime soon.  Metal balances are looking more comfortable for 2023. Supply growth and demand weakness should ensure this. These more comfortable supply and demand balances along with poor sentiment suggest that most metal prices will remain under pressure in the early part of 2023. We are more constructive as the year progresses though on the back of low inventories for a number of metals, expectations that we start to see monetary loosening and a modest recovery from China. Furthermore, there are still clear supply risks for a number of base metals. Up until now, Russian metals have avoided sanctions but clearly, there is always the risk that these are targeted at a later stage.  As for gold, the outlook is fairly constructive. We believe that as soon as we see any signs from the US Federal Reserve of a pivot, that this will provide solid support to prices. Agricultural commodities have also seen significant strength this year, particularly grains, due to the disruption in Ukrainian exports along with poorer weather in a number of key growing regions. These markets are going to remain sensitive to developments in the Russia/Ukraine war. However for now, we believe risks are skewed to the upside. There are some early signs that the winter wheat crop in some key growing regions will be smaller next season, whilst clearly for agri crops in general, yields could suffer due to less application of fertilisers, given the strength in the market this year. Overall, we believe in the short term that there is further downside for commodity markets. However, as we move towards the middle of the year, and once the worst of the demand worries are behind us, supply concerns are likely to take centre stage once again, which should push prices higher.   TagsRussia-Ukraine Metals Energy Commodities Outlook 2023 Agriculture Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Turbulent Times Ahead: Poland's Central Bank Signals Easing Measures

Only Market-Driven Prices Can Deliver Improved Productivity And Efficiency

Saxo Bank Saxo Bank 06.12.2022 09:39
Summary:  "In a war economy, the government hand will expand mercilessly as long as price pressures threaten stability." - Steen Jakobsen. Inflation will remain a challenge to control as long as globalisation continues to run in reverse and long-term energy needs remain unaddressed.   Nearly all wars have brought price controls and rationing, seemingly as inevitable as battle casualties. The list of precedents stretches at least as far back as the Roman emperor Diocletian trying to set maximum prices for all commodities in the late third century AD. Over the last century-plus we saw comprehensive price controls and rationing in the two world wars. And even without the context of war, price and even wage controls were implemented during the peak statist years under UK Prime Minister Wilson and even US President Nixon.   2022 has also seen early and haphazard initiatives to manage inflation. Taxes on windfall profits for energy companies are all the rage while governments are failing to use the classic tool of rationing supplies. Instead, they are actively subsidising excess demand by capping heating and electricity prices for consumers. In France, this simply means that utilities go bankrupt and must be nationalised. The bill is passed to the government and then to the currency via inflation. Then we have the likely doomed effort by western officials to cap Russian energy prices from December 5. The intent is to starve Russia of revenue and hopefully cheapen crude oil export prices everywhere, but it will likely do neither.   In a war economy, the government hand will expand mercilessly as long as price pressures threaten stability. The thinking among policymakers is that rising prices somehow suggest market failure and that more intervention is needed to prevent inflation from destabilising the economy and even society. In 2023, expect broadening price and even wage controls, maybe even something like a new National Board for Prices and Incomes being established in the UK and the US.   But the outcome will be the same as it is for nearly every government policy: the law of unintended consequences. Controlling prices without solving the underlying issue will not only generate more inflation but also risking tearing at the social fabric through declining standards of living due to disincentives to produce, and misallocation of resources and investment. Only market-driven prices can deliver improved productivity and efficiency through investment. Looks like we’ll have to learn the lesson all over again in 2023 and beyond.  Market impact: please see Outrageous Prediction on gold rocketing to USD 3,000.      Source: Widespread price controls introduced to cap inflation - Saxo Outrageous Prediction | Saxo Group (home.saxo)
Asia Morning Bites - 22.05.2023

China's reopening seems to be a double-edged sword as energy and commodities prices will go up

Ipek Ozkardeskaya Ipek Ozkardeskaya 29.12.2022 10:28
The good news with China's reopening is that it should boost global growth.   The bad news with China's reopening is that it will not only boost global growth, but also energy and commodity prices - hence inflation, the interest rate hikes from central banks and potentially the global Covid cases – which could then give birth to a new, and a dangerous Covid variant, which would, in return, bring the restrictive Covid measures back on the table, and hammer growth.   Note that the reasoning stops here right now, the risky markets are painted in the red, but we could eventually go one step further and say that if the Chinese reopening hits the global health situation – hence the economy badly, the central banks could become softer on their rate hike strategies. But no one is cheery enough to see silver lining anywhere.   This year really needs to end, now!  So, Wednesday was marked by further selloff across European and US markets. The S&P500 slid 1.20% and closed below the 50% Fibonacci retracement on the latest rally. The index gave back half of gains collected from October to November. Trend and momentum indicators, and more importantly market sentiment remain supportive of a deeper dive to meet the major 61.8% Fibonacci retracement, at 3724 mark.   Likewise, Nasdaq lost another 1.32%, and the dips don't look like anyone wants to grab them right now.  In Europe, the DAX struggles to keep its head above the 50-DMA, near 13925.   Across the Channel, despite political shenanigans and Brexit's knock-on effects, high inflation and the cost-of-living crisis, Britain's 100 biggest companies are preparing to close the year with small gains, while the S&P500 has lost more than a fifth of its value.   Why?  First, the British companies had to compensate for the weakening sterling this year –  but that's also true for the DAX, for example, but the DAX is also preparing to end the year around 15% lower. So, it's not only an FX story.   Second, and the most relevant, the fact that the FTSE 100 is heavily crowded in energy and mining stocks is what made the FTSE 100 perform so well this year.   Among the biggest market caps, BP and Shell are up by more than 40% each ytd.  Plus, British big caps make most of their revenues in terms of US dollars; a good thing for a year when sterling lost up to 23% against the greenback at some point and is still down around 10% right now.  And I believe that the FTSE 100's outperformance could stretch into the new year. If the Chinese reopening brings along another bump in inflation due to higher energy and commodity prices, the FTSE 100 could continue offering a good shelter to those willing to hedge against an energy-led global inflation to temper the negative effects.  Of course, the biggest British companies do not reflect the underlying British economy, so the FTSE 100's good performance won't change the fact that smaller, and domestic focused companies will likely continue to suffer from high inflation, recession and perhaps another year of political turmoil as a cherry on top. 
Policymakers and investors are now acknowledging the benefits of nuclear power and devoting greater research and resources into its development as a sustainable solution

Policymakers and investors are now acknowledging the benefits of nuclear power and devoting greater research and resources into its development as a sustainable solution

Franklin Templeton Franklin Templeton 10.02.2023 12:39
ClearBridge Investments: While misconceptions surrounding its risks have made it controversial, we believe nuclear energy is a safe, reliable, efficient and environmentally-friendly base power source to complement greater renewables penetration. Key Takeaways We believe nuclear energy is the ideal foundation for the energy transition, offering a safe, reliable, efficient and environmentally-friendly base power source to complement greater renewables penetration. While misconceptions surrounding the risks of nuclear power have made it controversial, greater fiscal support and understanding of its benefits are helping clear the way for increased usage. New innovations in nuclear power design and operations, such as small modular reactors (SMRs), are creating compelling long-term investment opportunities, in our view. Nuclear Makes Renewables a Sustainable Solution As global economies embark on a secular energy transition away from carbon-based power sources, renewable sources like wind and solar are simply not enough to satisfy the world’s demand for energy. We believe nuclear power, an energy-dense power solution with vastly superior carbon emissions characteristics, can play a critical supporting role in the transition. For all their environmental benefits, renewable power sources are limited by intermittency and a lack of sufficient energy storage. Inevitably, there will be days when the wind doesn’t blow or clouds starve solar panels of sunlight, making renewables less reliable than the power sources they are seeking to replace. Successful energy sources must adequately provide for persistent base power needs, but also accommodate occasional spikes in demand. While advancements in battery technology have helped renewables narrow the gap between their intermittency and the persistent need for power, even the most advanced batteries don’t have enough capacity to account for demand surges from adverse weather effects like Winter Storm Uri, which overwhelmed Texas in 2021. Nuclear, on the other hand, offers a safe, reliable, efficient and environmentally friendly baseload power source that can serve as the ideal foundation to help fill the gap created by greater renewables penetration. Nuclear plants run effectively around the clock at very high utilization rates and are designed to only require refueling typically every 18 to 24 months, surpassing the capacity utilization of coal or natural gas generators, which require more frequent refueling and maintenance. For example, a U.S. utility company that is the largest nuclear power operator in the U.S., has been able to operate its nuclear fleet over 94% of the time between 2013 and 2022,1 exceeding the 55%, 54%, 37% and 27% average utilization rates of natural gas, coal, wind and solar generators, respectively.2 This ability to provide high-quality, stable power generation makes nuclear the most reliable and dependable energy source to help solve for the variability in both renewable power generation and meeting energy demand growth. Nuclear power plants also provide a potential solution to energy storage challenges. Investments in hydrogen production technology would allow operators to redirect the fission process during peak renewables production (e.g., a sunny day) to create easy-to-store hydrogen, a dense and carbon-free fuel source. This creates a whole new set of opportunities, including using hydrogen as a flex fuel for higher power demand periods, power for industrial operations and long-haul transportation where electric vehicle batteries are insufficient. In fact, in November 2022, a British aerospace company announced it had successfully tested the first hydrogen-powered jet engine. While this demonstrates hydrogen’s potential as a fuel source, it also highlights that widespread adoption will require it to be produced in significant quantities, a task nuclear is uniquely suited for.   Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM While nuclear’s zero-carbon emission profile is well understood (if not properly valued), its low upfront carbon cost is vastly underappreciated. Although the energy that renewables generate may be carbon free, the initial resource intensity of their construction is not. Each wind turbine or solar panel requires immense allocations of metal, concrete and other resources that are the result of carbon-emitting manufacturing, effectively creating a carbon debt to be repaid. Conversely, the lifecycle emissions produced by nuclear is extremely low relative to the power produced, resulting in a substantially shorter payback period on its carbon debt (Exhibit 1).  Exhibit 1: Nuclear Ranks Lowest on Lifecycle Emissions As of December 31, 2020. Source: United Nations Economic Commission for Europe, Carbon Neutrality in the UNECE Region: Integrated Life-cycle Assessment of Electricity Sources. Overcoming Common Misconceptions For all its benefits, nuclear power remains controversial. While historical disasters such as Chernobyl, Three Mile Island and Fukushima loom large in policymakers’ and investors’ minds, the actual human costs pale in comparison to the historical death toll from the extraction and refinement of traditional fossil fuel sources. Neither the Three Mile Island or Fukushima plant meltdowns resulted in any direct deaths, and the total death toll from the Chernobyl disaster (including first responders and cleanup workers over the following weeks from radiation exposure) amounts to 30 people, according to a 2008 UN report.3 Excluding the Chernobyl disaster, the total number of nuclear fatalities globally between 1945 and 2007 was 32, with 24 of those fatalities related to military nuclear weapons programs rather than civilian power production. In contrast, the U.S. Department of Labor and Department of Transportation reported a total of 37 mining- and 11 pipeline-related fatalities in the U.S. alone in 2021.4 The safety of nuclear becomes even more evident when including the estimated fatalities stemming from the effects of air pollution generated by energy sources, further demonstrating that nuclear is one of the safest methods of power generation (Exhibit 2).   Exhibit 2: Fossil Fuels More Fatal Than Nuclear As of February 10, 2020. Source: Markandya & Wilkinson (2007); Sovacool et al. (2016); UNSCEAR (2008 & 2018), Our World in Data. Additionally, operators and engineers have learned from these situations, have retrofitted current plants and designed future plants to account for such extreme scenarios. For example, the Fukushima plant’s inability to maintain power due to flooding, as well as the inability to assess the level of coolant in the reactor, caused heat and pressure to build up and be released into the environment. In response, the U.S. Nuclear Regulatory Commission required plants with similar reactors to install new, hardened ventilation systems capable of releasing such heat and pressure before they reached critical levels as well as requiring secondary, independent electrical systems for coolant level monitoring instruments to ensure a continuity of monitoring even during an emergency. Another contention is that nuclear fission produces radioactive waste. In reality, waste products have been safely stored at nuclear facilities, without issue, for decades. In fact, in over 70 years since the first U.S. nuclear plant began operations, the total radioactive waste generated by all U.S. nuclear plants amounts to approximately 90,000 metric tons. If assembled and stacked together, the entirety of the U.S.’s nuclear waste could fit on a single football field at a depth of less than 10 yards,5 or within the footprint of a single Walmart Supercenter.6 The two biggest problems with nuclear power are cost and schedule overruns. A current example is Plant Vogtle, under construction in Georgia, a project estimated to cost over two times its initial $14 billion estimate with a completion date still uncertain. These challenges were directly responsible for the bankruptcy of a U.S. nuclear technology company and create further resistance to investment in new nuclear facilities (Exhibit 3). Exhibit 3: Nuclear Expansion Has Plateaued As of March 31, 2022. Source: U.S. Energy Information Administration. Legislation is Facilitating Investment and Innovation Despite these headwinds, we remain optimistic about nuclear’s long-term prospects. For starters, the Inflation Reduction Act (IRA) contains several provisions to help improve the competitiveness of nuclear power, incentivize investment in new facilities and upgrade and maintain existing plants to keep them operating at peak efficiency over the coming decades. For instance, the IRA’s new production tax credits provide up to $15 per megawatt-hour (MWh) subsidies through 2032 to help existing and aging nuclear plants remain competitive with other, more technologically up-to-date electricity generators. Additionally, the bill offers a tax credit equivalent to 30% of the capital cost of constructing new nuclear plants to help incentivize new nuclear infrastructure. With the average age of the U.S.’s nuclear fleet exceeding 40 years, these IRA subsidies are designed to help solidify and expand nuclear’s penetration in the U.S. energy mix. The IRA also contains a number of broad, technology-neutral tax credits that can be applied to help direct increased investment, research and development into nuclear power innovation, such as new, safer and more efficient advanced reactor designs. One such example is the sodium-cooled fast reactor, which trades traditional water coolant for liquid metal sodium, allowing the coolant to operate at higher temperatures and higher pressures. This helps improve the ability of the system to continue operating under more adverse circumstances and enhances the overall safety of the system. There is also recent innovation in “fast” reactor designs, which eliminate the need to slow down neutrons to cause a fission reaction, enabling fast reactors to recycle and use “spent” fuel from current nuclear reactors to reduce the overall nuclear waste produced. These broad-based carbon-free subsidies allow operators to invest in these new, advanced reactors for up to $25 per MWh through 2032 or until carbon emissions from electricity production have fallen by 75% from 2022 levels. SMRs Offer Immense Possibilities One of the most exciting developments in nuclear power is the design of small modular reactors (SMRs). According to the U.S. Department of Energy, the average U.S. nuclear plant has a capacity generation of approximately 1,000 MW per reactor and requires one square mile to operate. However, SMRs are designed to generate only 300 MW, allowing for a much smaller physical footprint and making them ideal for areas unable to support larger reactors. The reduced size of SMRs makes them capable of being produced in factories and transportable to their facility with minimal onsite assembly, allowing developers to leverage economies of scale in their assembly and design. Furthermore, the modular design of SMRs creates additional flexibility by allowing operators to add several reactor modules to an existing site with relative ease and speed in the case of increased power needs or surges in demand. While SMRs are still in development, the International Atomic Energy Agency has received over 70 different proposals for SMR designs, highlighting their immense possibilities, ranging from plants suited for urban centers, underground facilities more protected from terrorism and even as a potential power and propulsion source for spaceflight. Additionally, as inflation and geopolitical conflicts send traditional energy prices higher (Exhibit 4), the affordable, reliable and flexible power generated by SMRs is particularly well-suited for resource-poor countries where the possibility of energy shortfalls outweighs the risks.   Exhibit 4: Global Energy Prices Have Increased Since 1992 As of October 1, 2022. Source: International Monetary Fund, Global price of Energy index. Past performance is not an indicator or guarantee of future results. Finding Nuclear Investment Opportunities Although there are fewer opportunities to invest in nuclear energy companies than other energy providers, one of the most direct ways of doing so is through investment in nuclear-operating power utilities. These companies have significant nuclear power operations throughout the U.S. As experienced and established nuclear operators, they will likely be significant beneficiaries of increased subsidies, investment and innovation in nuclear power over the coming decades. Another compelling way to gain exposure to nuclear energy is through companies involved in the design, construction and maintenance of nuclear reactors. For example, one U.S. aerospace and defense contractor has manufactured over 400 nuclear reactors in the 60+ years of nuclear technology development, specializing in nuclear propulsion systems for U.S. Navy submarines and aircraft carriers. In addition to having a track record of safe and reliable performance, the company’s  expertise has allowed it to expand into services such as plant refurbishment and inspection and specialty engineering, and it is even working with NASA on a prototype high-efficiency reactor propulsion system for future Mars missions. As the need for nuclear power becomes better understood, innovators and infrastructure support experts in the private sector will be relied on to help facilitate its greater incorporation. Conclusion In a sea change from just a few years ago, policymakers and investors are now acknowledging the benefits of nuclear power and devoting greater research and resources into its development as a sustainable solution. We believe that greater incorporation of renewables into the global energy mix requires the kind of strong, stable and clean energy that only nuclear power can provide, making it the optimal foundation for the energy transition. Definitions The Inflation Reduction Act was signed into law by U.S. President Joe Biden on August 16, 2022. The Act aims to curb inflation by reducing the deficit, lowering prescription drug prices, and investing in domestic energy production while promoting clean energy. Small modular reactors (SMRs) are defined as nuclear reactors generally 300 MWe equivalent or less, designed with modular technology using module factory fabrication, pursuing economies of series production and short construction times. The International Atomic Energy Agency is the world's center for cooperation in the nuclear field and seeks to promote the safe, secure and peaceful use of nuclear technologies. The storm, unofficially referred to as Winter Storm Uri by the Weather Channel, started out in the Pacific Northwest and quickly moved into the Southern United States, before moving on to the Midwestern and Northeastern United States a couple of days later. February 13–17, 2021 North American winter storm. A kilowatt hour (kWh) is a measure of how much energy you’re using. 1 kilowatt hour is the amount of energy you’d use if you kept a 1,000-watt appliance running for an hour. A megawatt hour (MWh) is equal to 1,000 Kilowatt hours (kWh). It is equal to 1,000 kilowatts of electricity used continuously for one hour. Terawatt hour (TWh) is a unit of energy used for expressing the amount of produced energy, electricity and heat. 1 TWh = 1,000,000 MWh.   Endnotes Source: Exelon Corporation, “Constellation Shares Plan to Lead America’s Transition to a Carbon-Free Future as it Prepares for Separation from Exelon”, January 11, 2022. Source: U.S. Energy Information Administration, The Ultimate Fast Facts Guide to Nuclear Energy, 2019. Source: UNSCEAR (2008). Sources and Effects of Ionizing Radiation, UNSCEAR 2008 Report to the General Assembly. Source: U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration, U.S. Department of Labor Mine Safety and Health Administration. Source: U.S. Department of Energy, Office of Nuclear Energy Source: 3Q22 Constellation Energy Corporation.   WHAT ARE THE RISKS? Past performance is no guarantee of future results.  Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors. U.S. Treasuries are direct debt obligations issued and backed by the “full faith and credit” of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasuries when the securities are held to maturity. Unlike U.S. Treasuries, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities. The companies and case studies shown herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The opinions are intended solely to provide insight into how securities are analyzed. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the portfolio selection and research process. Factual statements are taken from sources considered reliable but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security. Past performance is not an indicator or a guarantee of future results. Source: Energy transition requires nuclear foundation | Franklin Templeton
Are crude oil prices rebounding on the back of a possible debt ceiling deal?

The Commodities Feed: Russian supply cut - 13.02.2023

ING Economics ING Economics 13.02.2023 11:45
At the end of last week, Russia announced that it would cut oil supply by 500Mbbls/d from next month. This does not change our view on the market, as we had already assumed that Russian supply would edge lower following the EU ban on Russian oil and refined products Tank farm for storage of petroleum products in Volgograd, Russia Energy- Russia announces oil supply cut The oil market finished last week strongly, rallying by more than 2.2% on Friday. This move higher came as  Russia announced that it would cut oil supply by 500Mbbls/d from March as a response to sanctions against it. While there is an element within the market that believes that this is Russia weaponizing energy, we feel that it is more likely that Russia is simply struggling to find buyers for its oil, particularly after the EU ban on Russian refined products came into force earlier this month. These cuts do not change our view on the market, given that we were already assuming that Russia would have to reduce supply as a result of the EU ban on oil and refined products. The weakness that we are seeing in prices in early morning trading today likely reflects the market coming to the realisation that these cuts are already largely priced in. Having rallied towards the end of last week, US natural gas prices have continued their move higher in early morning trading today. There are reports that Freeport LNG exported its first cargo over the weekend since June last year. The ship was reportedly loaded with supply from storage, while production is expected to restart soon. Markets are eagerly awaiting the restart of the 15mtpa Freeport plant. Firstly, it will improve supply prospects for the global LNG market, which is expected to remain fairly tight this year. And secondly, it will increase demand for feed gas, which should support domestic US natural gas prices. For the week ahead, OPEC will release its monthly oil market report on Tuesday. This report will include their latest outlook on the market as well as OPEC production numbers for January. The IEA monthly oil market report on Wednesday will follow it. Metals – Exchange inventories continue to rise in China The latest data from Shanghai Futures Exchange (ShFE) shows that weekly inventories for metals continued to grow over the last week. Copper stocks rose for a sixth consecutive week, increasing by 15,500 tonnes to 242,009 tonnes (highest since April 2020). Among other metals, zinc stocks rose 16% WoW to 105,669 tonnes, while aluminium inventories increased 9.6% WoW to 268,984. Both these metals saw inventories at their highest levels since mid-2022. Read next: Amazon Is Slowly Dismantling Tony Hsieh’s Version Of Zappos, Louis Vuitton Doubled Sales| FXMAG.COM MMG said that the Las Bambas copper mine would continue to operate at a reduced rate as the mine was able to secure critical supplies despite road blockades. However, the company said that it is monitoring the situation and if the operating conditions don’t improve, the mine would be forced to announce a period of care and maintenance.  The latest data from China Iron and Steel Association (CISA) shows that steel inventories at major Chinese steel mills rose to 16.5mt in late January, up 2.6% compared to mid-January. Crude steel production at major mills also edged higher to 1.99mt/d during the period. Agriculture – Lower coffee shipments The latest data from the General Department of Vietnam Customs shows that coffee exports fell 27.7% MoM to 142.5kt in January. Similarly, the Brazilian Coffee Exporters Council reported that Brazilian coffee exports declined 16.8% YoY to 2.8m bags in January, following lower supplies and producers’ resistance to selling stocks at current prices. The agency reported that Arabica coffee shipments fell 18.7% YoY to 2.4m bags, whilst Robusta exports declined 12.3% YoY to 87.6k bags. The latest fortnightly report from the UNICA shows that sugar cane crushing in Centre-South Brazil stood at 307kt over the second half of January compared to no crushing a year ago as the processing had already been halted by this time. Meanwhile, sugar production stood at just 17kt over the 2nd half of January, with around 43.1% of cane allocated to sugar production. UNICA reported just 3 sugar mills were still operating as of late January. Data from Ukraine’s Agriculture Ministry shows that farmers harvested 53.7mt of grain from 97% of the expected area as the harvest nears completion. The ministry added that the 2022 wheat harvest totalled 20.2mt, much lower than the 32.2mt harvested last season. As for corn, farmers harvested 26.4mt of the grain from 93% of the expected area. The USDA’s weekly export inspection data shows the demand for US grains remained soft over the last week. US weekly inspection of soybeans for export fell to 644kt, compared to 928kt in the previous week. Similarly, corn shipment inspections declined from 1.76mt a week ago to 1.17mt. Read this article on THINK TagsRussian oil ban OPEC Oil Natural gas LNG IEA Copper Coffee Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
fxpro-1-crude

The Commodities Feed: Bearish macro keeps pressure on oil

ING Economics ING Economics 27.02.2023 10:45
The oil market was softer this morning as macroeconomic concerns and a firm US dollar weighed on sentiment. Russian oil supply to Poland via the Druzhba pipeline halted over the weekend although the country has ruled out any major impact in the immediate term Energy: Supply interruptions from Druzhba pipeline Oil prices came under pressure in morning trade today after closing higher at the previous two consecutive sessions amid USD strengthening and macroeconomic concerns. The latest inflation report from the US has renewed concerns over higher interest rates by the Federal Reserve in the near term and overshadowed the supply outages from the Druzhba oil pipeline in Europe. PKN Orlen SA (the largest oil company in Poland) said that oil flows stopped unexpectedly via the Druzhba pipeline from Russia over the weekend. The pipeline has supplied around 400Mbbls/d of crude oil into Europe, mainly to Poland in recent months. However, the company said that end-users won’t be impacted by the halt in the immediate term as the Russian crude makes up only around 10% of the total supply; although longer disruptions to the transit route could have some impact. The latest data from Baker Hughes shows that the US oil rig count declined for a second consecutive week, by seven over the last week to a total rig count of 600. The number of active rigs in the US has been falling gradually since the start of the year. This is not a great signal for the market in terms of US supply growth, particularly with the tighter supply outlook from Russia.  The latest market positioning data shows that money managers trimmed their net long position in ICE Brent over the last week after hitting a one-year peak. Managed money net longs in ICE Brent dropped by 23,355 lots over the last week to 276,553 lots as of 21 February. Speculative net longs in ICE Brent are still comfortably higher when compared to the range over the past year and reflect the possibility of further liquidation if economic expectations deteriorate. Money managers reduced the net long position in NYMEX WTI by 3,986 lots over the last week to 184,488 lots. Metals: US to impose steep tariffs on Russian aluminium On Friday, the United States announced it will impose a 200% import tariff on Russian aluminium (effective from 10 March) and aluminium products made with metal smelted or cast in Russia (effective from 10 April). The tariffs are unlikely to significantly tighten the aluminium market in the US, given the nation’s small percentage share of aluminium imports from Russia. US purchases of aluminium products from Russia fell to about 200,000 tonnes last year, just 3% of total US imports - a small fraction of the global market of around 90 million tonnes. The move marked the one-year anniversary of Russia’s invasion of Ukraine. We discussed this in a note released on Friday. Meanwhile, the cash/3m spread for aluminium tightened to a contango of US$50.5/t as of Friday following the large inflows reported recently in exchange warehouses; for comparison, the market traded at a contango of US$35.5/t at the start of the year. The LME exchange inventories of aluminium witnessed inflows of 116,350 tonnes since the start of the year, taking the total stocks to 563,600 tonnes as of Friday. The latest data from the Shanghai Futures Exchange (ShFE) shows that weekly inventories for copper and aluminium rose marginally while lead stocks declined over the last week. SHFE Copper stocks rose 2,857 tonnes last week to 252,455 tonnes (highest since April 2020), whilst aluminium inventories gained 4,504 tonnes over the week to 295,920 tonnes at the end of last week. Lead weekly stocks fell by 38% WoW (-29,210 tonnes) to 48,006 tonnes (lowest since the first week of January) as of Friday. Agriculture: ISO trims global sugar surplus estimates In its latest quarterly report, the International Sugar Organization (ISO) revised down the 2022/23 global sugar surplus estimates to 4.15mt, compared to its earlier estimates of 6.19mt of surplus. The revision reflects the fall in production in India, Mexico, and Europe amid increased consumption. Global production estimates were reduced by 1.7mt to 180.4mt for the season. The organisation has also revised higher the market deficit estimates for 2021/22 from 1.67mt to 2.25mt. As per the Indian food ministry, the State-run Food Corporation has sold around 1.81mt of wheat in the domestic market to ease local grain and flour prices. The move is part of the government's ongoing plan to supply 5mt of grains to the market to help end users combat rising prices.  The USDA’s weekly net export sales report showed a fall in demand for corn and soybeans while wheat shipments increased for the week ending on 16 February. US corn shipments plunged to 848.7kt, lower than the 1,124.5kt reported in the previous week as well as below the average market expectation of 1,006kt. Similarly, soybean exports fell to 556.6kt, lower than 771.9kt in the previous week, and the average market expectation of 738kt. For wheat, the shipments rose to 418.8kt, higher in comparison to the 232.8kt reported a week ago and above the average market expectation of 259kt.  Reports from the European Commission show that the EU’s soft wheat production for the 2022/23 season is projected at 126mt, slightly lower than the January estimates of 126.4mt. Meanwhile, the exports are now seen at 32mt, lower when compared to the 34mt of exports projected in December. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: Supply disruptions persist

Aluminium smelter shutdowns threaten Europe's green transition

ING Economics ING Economics 14.03.2023 22:06
Another aluminium smelter in Europe is shutting down amid the ongoing threat posed by high energy prices. Since the start of the energy crisis, European aluminium output has fallen by more than half. These closures could also prove to be an obstacle to Europe’s green transition Source: Shutterstock High energy prices remain a threat to supply Aluminium producer Speira said it will shut down its German plant Rheinwerk this year due to the challenging energy market. Last September, the producer reduced capacity by 50% at the plant amid surging power prices. Speira said it will now focus solely on recycling and processing aluminium into value-added products. Soaring energy costs following Russia’s invasion of Ukraine have squeezed producers’ margins, with energy-intensive metals being particularly affected. Several output cuts have taken place since December 2021 at key European smelters. Europe had suspended about 1.4 million tonnes of capacity by the end of 2022, accounting for 2% of the global total. Aluminium, often referred to as “congealed electricity”, is the most energy-intensive base metal to produce, requiring about 40 times more energy to make than copper. One tonne of aluminium requires about 15 megawatt-hours of electricity. Falling energy costs in Europe have recently eased fears of a deep recession. TTF prices broke below EUR50/MWh in February, the lowest level seen since August 2021 after reaching an all-time high of EUR345/MWh in August 2022. So far, only Aluminium Dunkerque has announced a restart of its curtailed capacity of 60kt/y in France. The plant is expected to be operating at full capacity by the end of May, following support from the French government. But in the aluminium industry, restarting a smelter is a long and costly process, meaning some of the production halts we have seen since 2021, could be permanent. According to the latest data from the International Aluminium Institute (IAI), Western European aluminium output was at an annualised 2.73 million tonnes in December, down by 540,000 tonnes from December 2021 and the lowest production rate this century. Aluminium requires about 40 times more energy to make than copper Source: IAI, ING Research Production costs still too high for many smelters While LME aluminium prices have fallen by 40% since reaching historic highs a year ago, production costs remain too high for many aluminium smelters in Europe. Electricity is the largest single expense for producers, typically accounting for about 40% of production costs. LME aluminium prices reached a high of $3,849/t in March but have now declined from their post-invasion peaks, battered by fears of weakening global demand, as well as a stronger dollar. Growing recession risks in the US and Europe and an uncertain recovery in China is likely to continue to pose downside risks to the demand outlook. We still believe, with the war with Russia raging on and given the uncertainty over the gas market in 2023, smelters will be reluctant to bring back production too quickly. Further smelter closures and curtailments in production cannot be ruled out given the uncertainty over energy prices throughout this year. Any announcement of further closures could see aluminium prices spike but any potential rallies are likely to be unsustainable. We don’t anticipate European smelters restarting before 2024. Last month, Norsk Hydro warned that the market remained challenging for aluminium smelters despite a recent drop in power prices and that a further 600,000 tonnes of aluminium capacity would still be at risk if energy prices spiked again. European aluminium smelters hit by margin squeeze Primary Aluminium Production in Western and Central Europe (mt) Source: IAI, ING Research Aluminium smelting cost components Source: IAI, CINA, ING Research Smelter shutdowns threaten Europe's climate target path The most recent aluminium smelter shutdown comes at a time when Europe is trying to become more self-sufficient following Russia’s war in Ukraine. The more smelters shut down, the more reliant the region becomes on more expensive imports from more carbon-intensive suppliers, including China and Russia. European smelters generate three times less CO2 than those in China, where coal is most often used to generate electricity. Under the European climate target path, EU countries must cut greenhouse gas emissions by at least 55% by 2030, setting Europe on a path to becoming climate neutral by 2050. Aluminium is a key component in mobility and transport, buildings, construction, packaging, aerospace, and defence. It is also used in almost all energy generation, transmission, and storage technologies, particularly those that will deliver the energy transition, such as wind and solar power, alternative fuel cells, hydrogen production, high-voltage cables, and batteries. As a result, Europe’s 2030 energy transition will require four million tonnes of additional aluminium per year, rising to almost five million tonnes in 2040, equivalent to 30% of Europe’s aluminium consumption today, according to European Aluminium.  Read next: Pfizer Will Buy Biotech Seagen For $43 Billion| FXMAG.COM The highest growth in terms of absolute demand is expected to come from the transportation sector amid a shift to electric vehicles (EVs). By 2026, aluminium content per vehicle will rise by 12% to meet the needs of future hybrid vehicles and EVs, according to the Aluminium Association. Aluminium’s usage in batteries and other EV components will double automobile manufacturers’ consumption of aluminium by 2050, according to forecasts from IAI. Satisfying the increased demand via imports instead of producing in Europe would generate at least an additional 40 million tonnes of CO2 yearly, according to European Aluminium, equivalent to the yearly CO2 emissions of a country like Finland. Earlier this year, Eurometaux, the European metals industry’s main lobbying group, representing major European producers, including Glencore, Boliden and Aurubis, warned that further long-term financial support is needed to help Europe keep control of raw materials that are crucial to the green-energy transition. The European Commission is due to publish this week the Critical Raw Materials Act, which will attempt to lessen the dependence on non-democratic states and boost European autonomy to ensure the EU has access to materials needed to meet the bloc’s target of moving to net zero greenhouse gas emissions by 2050. The regulation is part of Europe’s answer to the US Inflation Reduction Act (IRA), which offers $369bn of subsidies to green-tech manufacturers and has prompted several multibillion-dollar investments into US battery manufacturing. Europe relies on aluminium imports Source: European Aluminium, ING Research Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Synthetic fuels could be the answer to shipping's net-zero goals, but don’t count on them yet

The Commodities Feed: FOMC day - 22.03.2023

ING Economics ING Economics 22.03.2023 14:03
Price action today will likely be largely dictated by the outcome of the FOMC meeting. It is still unclear whether the Fed will hold rates or hike. Recent developments in the banking sector make it a tough call Energy: Market awaits FOMC Oil prices rebounded yesterday with ICE Brent rallying by a little more than 2% as markets took comfort in comments from the US Treasury Secretary, Janet Yellen, that the government would be prepared to take further action to protect depositors in small US banks, although prices have weakened somewhat in early morning trading today.  Overnight, the API reported that US crude oil inventories increased by 3.26MMbbls, whilst on the products side, gasoline and distillates saw draws of 1.09MMbbls and 1.83MMbbls respectively. However, key for markets today will be the FOMC meeting amid continued uncertainty over whether the Fed will hold rates or hike by 25bp. Russia has said that the previously announced oil supply cuts of 500Mbbls/d for March will be extended until the end of June given current market conditions. Although, there is doubt over whether Russia has reduced output in March, given that seaborne crude exports have held relatively steady so far this month. Meanwhile, it appears unlikely that the G7 will revise the Russian oil price cap, with reports that some officials are reluctant to take such action. The cap was set to be reviewed in March and some EU countries (Poland) have been pushing for the price cap to be lowered from the current US$60/bbl. There are signs that the European gasoil market is tightening. The prompt ICE gasoil timespread is trading in backwardation of around US$30/t, up from around US$15/t at the start of March. This will be largely on the back of lower runs from French refiners. Continued strike action in France is affecting fuel deliveries and causing some refiners to halt or reduce operations. Total has halted its 247Mbbls/d Normandy refinery, whilst the remainder of Total and Exxon refineries are all operating below capacity. Metals: China imports of Russian aluminium climb China has nearly doubled its imports of Russian aluminium in the year since the invasion of Ukraine. Imports of refined aluminium from Russia, the largest aluminium producer after China, climbed 94% to 538,600 tonnes between March 2022 and February 2023 from the previous 12 months, according to Chinese customs data. This has happened as some Western buyers have rejected Russian supplies in their contracts. Read next: Softer Federal Reserve could play in favour of S&P 500 index| FXMAG.COM LME total on-warrant stocks for copper reported outflows of 5,500 tonnes (the biggest daily decline since 8 December) to 43,500 tonnes as of yesterday. Most of the outflows were reported from warehouses in Europe and Asia. Meanwhile, cancelled warrants for copper rose by 4,975 tonnes for a second consecutive session to 32,900 tonnes as of yesterday, signalling potential further outflows. Agriculture: Ukraine 2023 grain harvest to fall Ukraine’s Agriculture Ministry expects the 2023 grain harvest to fall by 17% year-on-year to 44.3mt as farmers reduce area, while average yields are also expected to be lower. The ministry estimates that domestic wheat output will fall by 19% YoY to 16.6mt, whilst the corn harvest is expected to fall 15% YoY to 21.7mt. The latest export data from Ukraine’s Agriculture Ministry shows that 2022/23 grain exports stood at 35.8mt as of 21 March, a decline of 20% YoY. Total corn shipments stood at 21mt (+2% YoY), whilst wheat exports fell 34% YoY to 12.3mt. Read this article on THINK TagsRussian oil price cap Refined product Oil Grains Diesel Copper Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
fxpro-1-crude

It was the average daily temperature that became a persistent fundamental trigger for the decline in crude oil prices

Andrey Goilov Andrey Goilov 20.03.2023 15:28
We saw a huge decline in commodities prices - was it about higher temparatures in the USA? Let's hear from Andrey Goilov from RoboForex. Andrey Goilov: An unusually warm winter in 2023 in the US could be the main reason for a number of declines in commodity prices, such as the prices for crude oil, oil products, gas, and other assets.Andrey Goilov: With energy demand normally increasing in winter, demand for energy carriers becomes higher as more fuel is withdrawn from reserves for heating purposes. The December 2022 to February 2023 period was expected to be cold, and asset prices were based on this forecast. However, weather conditions turned out milder, as a result of which expectations were not met. Read next: Microsoft, Amazon and Google increased by nearly 15% last week| FXMAG.COM Andrey Goilov: In the US, this was well displayed in the Department of Energy's weekly reports on commercial oil reserves. Towards the end of winter, the figures increased noticeably. This, among other things, put pressure on the price of crude oil. Naturally, weather conditions are just one of the factors negatively affecting oil prices Andrey Goilov: Naturally, weather conditions are just one of the factors negatively affecting oil prices. There are many other reasons to sell black gold. However, in this case, it was the average daily temperature that became a persistent fundamental trigger for the decline in crude oil prices. Visit RoboForex
Synthetic fuels could be the answer to shipping's net-zero goals, but don’t count on them yet

The Commodities Feed: Further spec liquidation

ING Economics ING Economics 27.03.2023 12:09
Given the moves seen in the oil market in recent weeks, it was no surprise that speculators aggressively cut their net long in the oil market. Meanwhile, EU energy ministers meet this week to discuss an extension in voluntary gas demand cuts, while for LME nickel, Asian trading hours finally resume today, following the short squeeze in March last year Source: Shutterstock Energy - Speculators cut further longs Despite the weakness in the oil market towards the end of last week, ICE Brent still managed to settle almost 2.8% higher WoW and more importantly, hold above US$70/bbl in the recent sell-off. Price action in early morning trading today is looking more positive with both Brent and WTI trading stronger. It shouldn’t come as too much of a surprise that positioning data shows that speculators once again cut their net long in ICE Brent significantly. The managed money net long fell by 63,459 lots over the last reporting week to 169,925 lots as of last Tuesday. This reduction was driven largely by longs liquidating (42,880 lots), but there was also a fair amount of fresh shorts added (20,579 lots). The latest data show that most of the gross longs that we saw added over January and February have now been closed out.  Given the more neutral spec positioning, this leaves speculators with quite a bit of room to push the market higher. Although, obviously for that, we will need to see a change in sentiment and an easing in concern over recent developments in the banking sector. There are reports that Nigeria is finding it difficult to find buyers for its April loadings of crude oil. Bloomberg reports that somewhere between 20-25 shipments are still unsold for the month. This comes at a time when strike action in France (which is a relatively large buyer of Nigerian crude) has led to refiners reducing runs, which obviously weighs on crude oil demand. In addition, some seasonal maintenance is ongoing at several European refiners, which will not be helping matters. Read next: US Banks: The good and the bad| FXMAG.COM EU energy ministers are set to meet this Tuesday to discuss a number of topics, including natural gas demand reductions. The 15% voluntary demand reduction agreed upon last year, is set to expire at the end of March. The current proposal sees the 15% voluntary demand cut extended through until March 2024. Our balance suggests that from April 2023 through to March 2024, the EU will only need to see around a 10% demand cut to ensure a comfortable supply/demand picture for the region. Metals – LME aluminium on-warrant stocks decline LME on-warrant aluminium stockpiles fell by 4,825 tonnes for a fifth consecutive day to 426,975 tonnes on Friday, the biggest fall since 10 March. Most of the outflows were reported from warehouses in Asia. Net outflows for the week totalled 10,925 tonnes as of last week compared to the inflows of 10,825 tonnes a week earlier. Meanwhile, exchange inventories declined for the fifth straight session, falling by 6,625 tonnes to 532,725 tonnes at the end of last week. Data from the Shanghai Futures Exchange (ShFE) shows that weekly exchange inventories for aluminium declined by 18,170 tonnes to 293,291 tonnes as of Friday. This was the first weekly decline in stocks since December. Among other metals, copper stocks fell 11.6% WoW to 161,152 tonnes,  whilst lead inventories fell 25% WoW to 37,537 tonnes. The latest reports suggest that operations at the Las Bambas copper mine in Peru are back to normal, as MMG Ltd. confirmed over the weekend that ‘the mining processing and transport of concentrate is back to full capacity’ following the end of roadblocks by community protestors. Chinese refined nickel net imports have slumped to near a record low after domestic producers ramped up production levels. Data from Chinese Customs shows that net imports of refined nickel fell 85% MoM (lowest since October 2019) in February. The latest forecast from Mysteel shows that domestic refined nickel output may rise 39% YoY to 245.9kt in 2023 as smelters process Indonesian intermediate products and recycled material. The LME will resume Asian trading hours for its nickel contract from today. The LME will be hoping that this leads to a boost in volumes and helps to improve liquidity. Asian trading hours for the LME nickel contract were suspended last year following the significant short squeeze seen in the market in March last year. Agriculture– Ivory Coast cocoa shipments slow The latest reports from the International Cocoa Organization (ICO) show that cocoa exports from the top producer, Ivory Coast, stood at 540kt between October 2022 to January 2023, down 9.3% YoY. Total arrivals of beans at ports in the Ivory Coast for the season (as of 19th March) were 1.75mt, down from 1.82mt from the same period last year. The latest CFTC data shows that money managers reduced their net bearish bets in CBOT wheat by 8,757 lots over the last week to 86,500 lots as of 21 March. The move was predominantly driven by short covering. Similarly, the speculative net short in CBOT corn decreased by 12,238 lots to 41,896 lots, while for soybeans, speculators reduced their net longs by 16,875 lots, leaving them with a net long position of 110,786 lots. Read this article on THINK TagsSpeculators Oil Nickel Natural gas Cocoa Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bearish WASDE Report Impacting Corn, Soybeans, and Wheat

The Commodities Feed: EU extends gas demand cuts

ING Economics ING Economics 29.03.2023 12:49
Oil prices remain well supported with ongoing supply disruptions from Iraq. Meanwhile, EU energy ministers have agreed that voluntary gas demand cuts will be extended by another year Gas storage tank Energy - supply concerns linger Oil prices remained well supported yesterday and continue to be in early morning trading today. Supply concerns continue to prop up prices. Iraqi oil flows via Turkey have still not resumed following a legal ruling last week that ruled in favour of the Iraqi government. The Iraqi government believes that Kurdish oil should not be exported via Turkey without Iraq’s approval. The volumes affected are fairly large at around 400Mbbls/d. Talks have so far failed to reach an agreement. There are reports that the US is pushing the parties involved to resume these oil flows. Providing further support to the oil market overnight was bullish inventory data from the API. US crude oil inventories are reported to have fallen by 6.1MMbbls over the last week - quite different from the small build the market was expecting. Meanwhile, crude oil inventories at Cushing also declined by 2.4MMbbls. Product inventory changes were also constructive, particularly for gasoline, with stocks falling by 5.9MMbbls. The more widely followed EIA report will be released later today. EU energy ministers met yesterday and agreed that the voluntary 15% natural gas demand cut will be extended by 12 months through until the end of March 2024. These voluntary cuts were scheduled to expire at the end of this month. As before, these voluntary cuts could become compulsory if the EU gas market was to tighten significantly. Our balance sheet shows that the EU will not need to see cuts as large as 15% from April onwards. Instead, we believe a 10% demand cut will be enough. The European Commission is also looking at a way of tackling Russian LNG flows into Europe. Whilst Russian pipeline flows have fallen significantly since the war, LNG imports from Russia have grown significantly. Russian LNG flows to Europe last year totalled around 22bcm, up more than 37% YoY. The EU is looking at giving members the option to block Russian firms from booking capacity at import terminals. This would basically give member countries the option to block Russian LNG imports, without the region having to impose sanctions.   Metals – Dollar weakness lifts prices Industrial metals edged higher yesterday with LME copper prices approaching the $9,000/t mark as the USD continued its decline for a second straight session, while risk sentiment appears to also be improving. The latest LME COTR report shows that investors reduced their net bullish positions for aluminium by 5,833 lots to 91,578 lots, whilst net long positions in zinc fell by 1,639 lots to 30,892 lots (the lowest in four months) as of last Friday. In contrast, speculators increased net long positions in copper by 3,947 lots (after falling for two consecutive weeks) to 47,218 lots in the week ending 24 March. Read next: Hungary’s central bank ain’t got no room for change| FXMAG.COM Iron ore prices continued their recovery yesterday amid expectations of stronger Chinese steel consumption as the peak construction season starts. Tighter supply has also provided support to the market. Daily exports of iron ore from Brazil have been down so far in March. The latest data from Brazil’s economy ministry shows that daily average exports of iron ore reached 1.14mt/d in the first 18 business days of March, compared to shipments of 1.3mt/d last month and 1.31mt/d in March 2022. Fortescue Metals Group now expects the first output from its Iron Bridge Magnetite Project in the second half of April. Previously, the company said that production would start at the project at the end of 1Q23. The mine is expected to produce 22mtpa of high-grade 67% iron magnetite concentrate. Agriculture –Indonesia's 2023 coffee output to fall The Association of Indonesian Coffee Exporters and Industries expects domestic coffee production to fall 20% YoY to 9.6m of 60kg bags this year, down from 12m bags in 2022 due to severe rainfall. The group further added that Indonesia’s bean exports are projected at 250kt in 2023, down from 320kt in 2022. The latest data from Ukraine’s Agriculture Ministry shows that 2022/23 grain exports stood at 36.9mt as of 27 March, a decline of 17.7% YoY. Total corn shipments stood at 21.7mt (+6.7% YoY), while wheat exports fell 31.4% YoY to 12.6mt. Read this article on THINK TagsSpeculators Oil Natural gas LNG Iron ore Grains Copper Coffee Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: Supply disruptions persist

The Commodities Feed: Supply disruptions persist

ING Economics ING Economics 30.03.2023 09:26
Oil prices traded lower yesterday despite a fairly bullish EIA inventory report and Kurdish supply concerns lingering Source: iStock Energy - Kurdish oil flows still blocked The oil market edged lower yesterday, despite fairly constructive US inventory data from the EIA. US crude oil inventories fell by 7.49MMbbls over the last week, the largest draw in commercial inventories since November and only the second decline in stocks so far this year. However, at almost 476MMbbls, crude inventories remain around 26MMbbls above the 5-year average for this time of year. The draw was driven largely by a fall in imports, with crude oil imports falling by 847Mbbls/d WoW. Exports remained above 4MMbbls/d over the week. Refiners increased utilisation rates by 1.7pp to 90.3% - the highest levels seen so far this year. Despite the stronger refinery runs, gasoline inventories fell by 2.9MMbbls over the week. Implied gasoline demand increased by 185Mbbls/d, taking gasoline demand in excess of 9.1MMbbls/d- the strongest levels so far this year. As a result, total US gasoline inventories stand at less than 227MMbbls,  the lowest levels seen at this stage of the year since 2014. Distillates saw a marginal build of 281Mbbls over the week. The US energy secretary has said the US could start refilling its strategic petroleum reserve (SPR) later this year, according to Reuters. Oil prices have recently traded in the price range (WTI- $67-72/bbl) where the US government had previously said it would look to start buying to replenish inventories. Due to maintenance and also the mandated release of 26MMbbls from the SPR, the government recently said it would be difficult to start refilling the SPR at the moment. Potential SPR buying was expected to provide somewhat of a floor to the market, but clearly that is not the case, at least in the near term. Read next: Today, the US GDP goes public. Eurozone inflation expected to reach 7.1%| FXMAG.COM The standoff with Kurdish oil flows via Turkey continues and the halting of pipeline flows has meant that producers in the Kurdish region have had to start reducing output. Producer, DNO has said it has started an orderly shutdown of its fields in the region. These include the shutting down of Tawke and Peshkabir, which produced 107Mbbls/d in 2022. The Kurdish and Iraqi authorities are still trying to work out an agreement which would allow roughly 400Mbbls/d of oil flows from the Kurdish region to resume. Metals – US cobalt mine halts construction The latest reports suggest that Jervois Global Ltd. will halt construction at its Idaho cobalt mine in the US, due to declining cobalt prices and rising construction costs. The company said that the project was nearing completion earlier this month and was expected to produce 2,000t/yr. Cobalt prices are down more than 30% YTD, trading just below US$35k/tonne. Agriculture –Thai sugar production lowered Recent estimates from the Thai Sugar Millers Corp. show that domestic sugar production will reach 11mt this season, 8.5% higher than the previous year. However, it was lower compared to the initial forecasts of 11.5mt of sugar in 2022/23. The harvest has essentially already ended, with latest data showing that millers have crushed 93.73mt as of 27 March, resulting in 10.93mt of sugar so far this season. Read this article on THINK TagsSugar SPR Oil EIA Cobalt Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bearish WASDE Report Impacting Corn, Soybeans, and Wheat

The Commodities Feed: All eyes on US CPI

ING Economics ING Economics 12.04.2023 10:38
The commodities complex held up well yesterday despite the IMF downgrading its global growth forecasts. For today, all attention will be on US CPI data, which is expected to show a further slowing Source: Shutterstock Energy: Middle distillate market under pressure Despite the IMF slightly lowering its global growth forecasts for the year and signalling that risks are skewed to the downside, the oil market still managed to close higher yesterday. ICE Brent settled 1.7% higher on the day. A weaker USD provided some support not just to oil but to the broader commodities complex. For today though attention will be on US CPI, where the market is expecting to see a further slowing. The year-on-year and month-on-month CPI are expected to come in at 5.1% and 0.2%, respectively. Clearly, any surprises to the upside could prove negative for risk assets with the market likely having to readjust its expectations on how much more tightening we will see from the Federal Reserve. The EIA released its latest Short Term Energy Outlook, where US crude oil production estimates were slightly increased. The EIA revised its 2023 US supply growth number from 560Mbbls/d last month to 660Mbbls/d this month, which would leave output averaging 12.54MMbbls/d. The EIA also expects slightly stronger growth over 2024 with supply set to grow by 210Mbbls/d, which would see output averaging 12.75MMbbls/d. Read next: FX Daily: IMF warns of a ‘perilous phase’| FXMAG.COM Overnight, the API released US inventory data. US crude oil inventories are reported to have increased by a marginal 400Mbbls, although the market was expecting a draw of closer to 1MMbbls. However, crude inventories held at Cushing are reported to have fallen by 1.4MMbbls. Stocks at Cushing have been declining for several weeks now, which has provided some support to the prompt WTI timespread with it having shifted from contango into a small backwardation. Meanwhile, we are seeing a further easing in strike action in France, which has plagued the French energy industry for the last month. TotalEnergies has said that it is restarting its 247Mbbls/d Normandy refinery, whilst the restart of the 219Mbbls/d Donges refinery is already in progress. This is after workers voted to end strike action and follows ExxonMobil workers also voting to end strike action last week. The increase in French refinery runs and broader concerns over global growth have weighed heavily on gasoil cracks with the prompt crack trading below US$20/bbl for the first time since February last year. In addition, nearby ICE gasoil timespreads have collapsed. Metals: Higher zinc treatment charges The latest reports suggest that zinc smelters have agreed to a 19% YoY increase in treatment charges for 2023 supply. Korea Zinc Co. and Teck Resources Ltd. have agreed on a treatment charge of US$274/t, up from US$230/t last year and the highest in three years. European smelter closures would have played a large role in these higher treatment charges, although lower energy prices should see some of these smelters restart production. The latest data from the LME shows that the share of Russian aluminium stocks in LME warehouses has climbed to 53% (220,575 tonnes) in March, compared to 46% and 41% reported in February and January, respectively. Agriculture: USDA cuts Argentine corn and soybean production The USDA left its estimates for US corn ending stocks for 2022/23 unchanged at 1.34b bushels in the April WASDE update. Although this was higher than expectations of around 1.32b bushels. The global corn balance saw 2022/23 ending stocks lowered from 296.5mt to 295.4mt, which was largely in line with market expectations. There were some fairly large revisions lower in output. Given the unfavourable weather in Argentina, the crop was downgraded from 40mt to 37mt, whilst EU output was also lowered from 54.2mt to 52.97mt. These reductions were partly offset by a 1.83mt revision higher in Russian output. Overall, the report was slightly bearish for corn prices. For soybeans, yesterday’s price action was surprising given that both US and global ending stocks came in above market expectations. The US domestic balance saw 2022/23 ending stocks left unchanged at 210m bushels, whilst expectations were for a number closer to 198m bushels. As for the global balance, 2022/23 ending stocks were increased slightly from 100mt to 100.3mt, higher than the 98.6mt expected.  Higher projected stocks come despite Argentine production being cut from 33mt to 27mt. This reduction was partly offset by a 1mt increase in Brazilian output, whilst consumption was also lowered by a little more than 5mt. Wheat prices came under pressure with US 2022/23 ending stocks increased from 568m bushels to 598m bushels, which is higher than the roughly 574m bushels the market was expecting. The revision higher was a result of largely weaker domestic demand. Changes to the global balance were more supportive. Global 2022/23 ending stocks were lowered from 267.2mt to 265.1mt, which is lower than the roughly 267mt the market was expecting. Projected ending stocks for this season are the lowest since 2015/16. The decline was driven by stronger feed demand from both China and the EU. Read this article on THINK TagsZinc WASDE USDA Oil Diesel Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
fxpro-1-crude

The Commodities Feed: Oil looking for a floor

ING Economics ING Economics 05.05.2023 10:35
The macro picture continues to dictate oil price action. However, fundamentals later this year remain constructive Source: Shutterstock Energy - Oil fundamentals still supportive The oil market is set for its third consecutive week of declines over growing demand concerns. At US$72.50/bbl, ICE Brent is down almost 9% over the course of the last week. Sentiment clearly remains negative, which suggests that there could be some further downside in the near term, although, we would expect the market to find good support near the March lows of around US$70/bbl. While sentiment is negative at the moment, the market is in oversold territory and our balance sheet still shows that the market will be in deficit over 2H23, which should drive prices higher. OPEC+ has announced that their next meeting in Vienna on 3-4 June will be held in person. The last time the group held an in-person meeting was back in October last year when the group announced that they would reduce production targets by 2MMbbls/d. Clearly, if the current downward trend continues in prices, the group would likely be forced to make further supply cuts. Saudi Arabia lowered its official selling prices (OSPs) for all grades of its crude oil into Asia for June. The OSP for Arab Light into Asia was lowered by US$0.25/bbl MoM to US$2.55/bbl over the benchmark. Meanwhile, all grades into Europe were increased for the month, while most grades into the US were left unchanged with the exception of Arab Light, which was cut by US$0.50/bbl. Lower OSPs will be helpful for Asian refiners, who have been dealing with weaker margins recently. Read next: Asia Morning Bites - 05.05.2023| FXMAG.COM The latest data from Insights Global shows that refined product inventories in the ARA region increased by 318kt over the week to 6.26mt. The increase was driven by fuel oil and gasoil. Stocks grew 171kt and 109kt respectively. At 2.35mt, gasoil inventories remain above the 5-year average. In Singapore, refined product stocks fell by 2.27MMbbls over the week to 43.96MMbbls. This was largely a result of a fall in residual fuel oil inventories. Agriculture – Black Sea grain deal uncertainty Uncertainty in the wheat market remains due to the Black Sea grain deal. The deal is set to expire on 18 May and discussions are expected to take place today with the hope that the deal is extended sometime next week. Recent Russian accusations of a Ukrainian drone attack on the Kremlin raise concern over Russia's willingness to extend the deal. The latest data from the International Coffee Organization shows that global coffee exports stood at 12.02m bags in March, down 9.3% YoY. This includes Arabica exports of 6.8m bags (down 14% YoY) and Robusta exports of 5.3m bags (down 2.2% YoY). Cumulative exports between October 2022 and March 2023 stood at 62.3m bags, down 6.4% YoY. Read this article on THINK TagsSaudi Arabia Refined product OPEC+ Oil Grains Coffee Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: Specs continue to cut oil longs

Crude oil - is inflation good for black gold? Why? Why not?

Ipek Ozkardeskaya Ipek Ozkardeskaya 10.05.2023 14:24
No one was naïve enough to expect an agreement on the US debt ceiling yesterday, when US President Joe Biden met Kevin McCarthy. But some hoped that there could be at least an extension of the debt ceiling to September, until the end of the current fiscal year, which would allow both parties to engage in deeper talks about what to do with the 2024 budget and the debt ceiling altogether.   But no.   Biden and McCarthy couldn't agree on much, but they agreed that there would be no extension to the debt ceiling.   Biden doesn't want to push US to default – that would be a disaster – but he can't agree on severe budget cuts either. His electors would be too angry. The leaders will meet again on Friday. Debt ceiling discussions will certainly extend toward the last minute, and the chances are that we see a last-minute goal to avert a possible US government default. Until then, uncertainty will loom, and risk appetite will likely remain limited.  US treasuries remain under a decent selling pressure especially on the short end of the yield curve as investors dump US short term papers due to the rising US default risk. The US 1-month bill yields around 5.60%, the US 2-year yield advanced past the 4% mark, the S&P500 slid 0.46%.   The US dollar popped higher on Tuesday, boosted by the rising US yields, but gold is certainly a better alternative for hedging a potential US default risk, as a potential default would clearly put pressure on growth prospects, Federal Reserve (Fed) expectations and weigh on the dollar as a result.   Gold is a better choice for hedging against rising tensions with China, as well, as Italian PM Meloni told McCarthy yesterday that she wants to exit the Chinese Belt and Road Initiative. The price of an ounce trades around the $2030 this morning and could find the force to test the $2080 offers to the upside and clear them. Upside potential extends to $2200 per ounce.   Similarly, the long end of the US yield curve could be an interesting refuge for risk averse investors, given that a potential US default would immediately send the Fed rate cut expectations to the moon, and would apply a decent pressure on the long end of the yield curve. US 10-year papers now yield around 3.50%. In case of a problem, we could see them fall all the way to 2.80/3%.   Read next: China's trade data show Chinese exports increased faster than expected in April| FXMAG.COM Looking at Bitcoin, it doesn't seem to offer any relief to actual stress. The price of a coin is down below the $28K mark, and could remain under pressure, parallel to sentiment in tech stocks.  And US inflation?  The US will reveal a much-important update to its CPI today, and the data could also shake sentiment at today's trading session.   Core inflation is expected to have slightly eased from 5.6% to 5.5% in April, headline inflation is seen steady at 5%, while we might see an uptick in monthly headline figure, to 0.4% from 0.1% printed a month earlier due to the spike in energy prices after OPEC cut production last month.   In all cases, whatever we see in US CPI report today, it's important to note that inflation expectations are falling. The NFIB survey showed yesterday that there is a severe decline in the number of small companies that are expected to raise prices. That should, at some point, play in favour of slowing price pressures.  For today, a CPI report in line with expectations will keep focus on debt ceiling, but a report that diverges from expectations could give an extra spin to market pricing. A softer-than-expected CPI report should further fuel the Fed rate cut expectations into this fall and relieve a part of the positive pressure on US yields, whereas a stronger-than-expected read will hardly boost any hawkish bets at this stage. Concerns regarding the US regional banks and the unresolved debt ceiling issue hint that the Fed can no longer walk alone and hike rates. Therefore, a stronger inflation report would only hint at lower real returns on US denominated assets. The latter would weigh on the US dollar, help the EURUSD rebound past 1.10, and keep Cable upbeat near a long-term trend negative trend top.   Is inflation good for oil?  One frequent question is how would oil react to inflation data. Is inflation good for oil prices, or is it bad?   Some argue that inflation is good for oil, because oil tends to perform well in periods of high inflation. This is true. But if oil performs better during periods of high inflation, it could be because higher oil causes higher inflation.   And the opposite – higher inflation is good for oil – may not be true.   There are two reasonings.  If inflation is higher because of strong growth and robust demand, a period of high inflation could be supportive of oil.   But today, we are mostly talking about a looming recession and tightening monetary conditions. In this context, higher inflation may not translate into better appetite for oil, if a scary inflation number fuels the hawkish Fed expectations.  The barrel of US crude is trading around $73pb this morning. The $75/76 range, which shelters the 50, 100-DMA, will likely act as a solid resistance to price advances.   In the medium run however, crude oil outlook remains neutral to positive, as tighter supply from OPEC and rising demand, especially due to the rebound in travel demand, should continue giving support to the bulls. But whether we would see levels above $80pb sustainably is yet to be seen.
Bearish WASDE Report Impacting Corn, Soybeans, and Wheat

The Commodities Feed: CPI numbers weigh on complex

ING Economics ING Economics 11.05.2023 10:56
Commodities came under pressure yesterday with US CPI numbers calling into question whether the Federal Reserve is done with its current hiking cycle. For oil, the market will be keeping an eye on today's OPEC report Energy: US CPI weighs on energy complex Oil’s four-day streak of gains finally came to an end yesterday with ICE Brent settling more than 1.3% lower on the day. This was part of a broader move with most of the commodities complex coming under pressure. US CPI numbers probably raised some doubts over whether the Fed’s hiking cycle is truly over. The headline CPI number in April increased by 0.4% month-on-month and 4.9% year-on-year. As our US economist points out we need to see MoM prints averaging around 0.17% over time in order to bring inflation down to around 2%. The EIA weekly inventory reports would have also done little to help sentiment. US commercial crude oil inventories increased by 2.95MMbbls over the last week, slightly lower than what the API reported the previous day, but still above market expectations. In addition, crude inventories at Cushing edged up by 397Mbbls. Product numbers were more constructive with gasoline and distillate fuel oil inventories falling by 3.17MMbbls and 4.17MMbbls, respectively. Implied demand was also stronger over the week, driven by gasoline, which increased by 685Mbbls/d week-on-week. As a result, four-week rolling average gasoline demand is just short of 9MMbbls/d, but above levels seen at the same stage in both 2021 and 2022.   In recent days there has also been somewhat of a recovery in middle distillates. For much of the year, a weaker middle distillates complex has weighed heavily on refinery margins. However, gasoil cracks have once again been trending higher since the beginning of May. However, with the ICE gasoil crack trading at a little over US$16/bbl, it is still well below the more than US$45/bbl seen back in January. It is also worth pointing out that speculators hold a sizeable short position in ICE gasoil. Positioning data from last week shows that speculators hold a net short of 32,542 lots, after selling 31,857 lots over the week. This selling has been largely fresh shorts rather than longs liquidating and so any sustained strength in gasoil prices could force these relatively fresh shorts to run to cover.     OPEC will release its latest monthly market report later today, which will include April production numbers for the group, as well as OPEC’s latest outlook for the market. In last month’s report, OPEC forecast 2023 oil demand growth at 2.32MMbbls/d, of which 94% is expected to be driven by non-OECD countries. Metals: Chinese origin LME copper inventories grow China is now the largest source of copper stored in LME warehouses, surpassing Russia, according to the latest report from the exchange. Volumes of copper originating from China rose to 26,675 tonnes in April, up from 15,575 tonnes in March, whilst copper of Russian origin rose slightly to 23,200 tonnes, from 22,275 tonnes in March. China has seen a sizeable increase in refined copper exports over the last couple of months, suggesting that domestic demand is not as strong as many were expecting. Meanwhile, LME copper cancelled warrants fell to 225 tonnes yesterday – the lowest on record, signalling weakening consumer demand. In other metals, Russian aluminium stocks stood at 256,125 tonnes in April, from 220,575 tonnes in March. India was the second largest source of LME aluminium at 228,800 tonnes. Read this article on THINK Tags OPEC Oil LME Gasoil EIA CPI Copper Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bearish WASDE Report Impacting Corn, Soybeans, and Wheat

The Commodities Feed: Renewed pressure

ING Economics ING Economics 12.05.2023 11:32
The commodities complex has come under further pressure. China demand concerns, lingering banking sector worries, and uncertainty over the US debt ceiling have all weighed on the complex There appears to be some progress on the resumption of Kurdish oil flows via Ceyhan in Turkey Energy – possible restart in Kurdish oil flows After a strong start to the week, the oil market has come under renewed pressure more recently with Brent settling almost 1.9% lower yesterday. Most of the commodities complex came under pressure due to lingering banking concerns, worries over the US debt ceiling and questions growing over how strong a Chinese recovery we are seeing. Chinese consumer inflation data for April came in at just 0.1% year-on-year, which was below market expectations. Similarly, the producer price index also came in below expectations. During testimony, the US energy secretary said that the Department of Energy (DoE) could start to refill the strategic petroleum reserves (SPR) once mandated releases come to an end in June. Originally the US administration had said that it would look to start refilling the SPR if WTI traded down to the US$67-72/bbl area. The market has traded down to these levels this year, but we have seen no signs of refilling. The DoE had said previously it would be difficult to refill the SPR until later in the year due to mandated releases and maintenance at storage sites. On the supply side, there appears to be some progress on the resumption of Kurdish oil flows via Ceyhan in Turkey. Iraq’s oil minister has said that exports via Ceyhan would resume on 13 May with Iraq’s state-run oil company informing Turkey’s Botas of the resumption. Although, there does not appear to be confirmation from Turkey yet. A return of this oil would bring in the region of 450Mbbls/d back to the market. Markets will need to keep an eye on wildfires in Canada. Up until now, it has been the gas-producing regions within Alberta that have been affected by the fires. However, there are concerns that rising temperatures over the weekend could increase the risk of wildfires in Northern Alberta, which could affect output in the oil sands. OPEC’s monthly market report yesterday had very little in the way of changes. The group left its non-OPEC supply growth estimate for 2023 unchanged at 1.43MMbbls/d, whilst global demand growth was also left virtually unchanged at 2.33MMbbls/d for 2023. The group also reported that OPEC production fell by 191Mbbls/d MoM to 28.6MMbbls/d in April. This decline was largely driven by Iraq and Nigeria. Metals – Copper gives up 2023 gains Copper slumped to its lowest level since November after China’s inflation data added to concerns over the strength of the country’s economic recovery. Both CPI and PPI numbers for April came in below market expectations, with CPI close to zero and PPI in negative territory. Copper climbed to a high of $9,550.50/t in January amid bets of a revival in Chinese demand following the end of Covid-19 lockdowns, but it has now given back all of the 2023 gains. In aluminium, LME on-warrant stockpiles fell by 132,675 tonnes, the most since 2019, according to data from the exchange. Most of the outflows were reported from warehouses in Port Klang, Malaysia. Meanwhile, cancelled warrants for aluminium rose by 132,500 tonnes following two consecutive days of declines, to 197,375 tonnes, the highest since 19 January, and signalling potential further outflows. On the supply side, the Shanghai Metals Market (SMM) reported that aluminium capacity in China is expected to rise significantly in the second half of the year. Operating rates of aluminium smelters in major producing regions of Shandong, Xinjiang and Inner Mongolia remained high in March. The combined capacity in the three provinces totals around 20.65mt, which is nearly half of the country’s total capacity. The group believes that roughly 930kt of aluminium capacity has been resumed as of 20 April while 212kt was newly commissioned, which almost equates to the 1.2mt of capacity reductions seen earlier. SMM estimates that another 2.63mt of aluminium capacity will be resumed while 1.57mt of new capacity will be commissioned later this year. In steel, Mysteel reported that Baoshan Iron & Steel Co., the top steel producer in China, trimmed its factory-gate prices of steel products by CNY200/t in June due to subdued demand. The producer said that the orders for June have weakened when compared to the current month, while slow overseas consumption has resulted in lower exports. Agriculture – UNICA reports lower cane crush The latest fortnightly report from UNICA shows that sugar cane crushing in Centre-South Brazil stood at 21mt over the second half of April, down 12.5% from a year ago as excessive rains disrupted crushing activity. The group reported that mills lost about 10 days of crushing in April due to the above-average rainfall. The market was expecting a number closer to 26mt. However, the cumulative cane crush is still up 18.8% YoY this season to stand at 34.8mt. Read next: Rates Spark: Balancing data and risk factors| FXMAG.COM Sugar production stood at 989kt over the fortnight, with around 43.8% of cane allocated to sugar production. Cumulative sugar production rose by 43.7% YoY to 1.5mt. UNICA said that around 197 mills had started processing cane for the season by the end of April, higher than the 184 mills that had started by the same stage last season. Read this article on THINK Tags Sugar SPR OPEC Oil Copper Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: US announces SPR purchase

The Commodities Feed: US announces SPR purchase

ING Economics ING Economics 16.05.2023 10:56
The oil market strengthened yesterday on the back of the US announcing it will start refilling its Strategic Petroleum Reserve (SPR). Meanwhile, today’s Chinese industrial output data was mostly disappointing, however, Chinese oil refining activity and apparent demand over April should be supportive Source: Shutterstock Energy – US set to start SPR refill Oil prices finally managed to settle higher yesterday with ICE Brent closing more than 1.4% up on the day, and this strength has continued in early morning trading today. While large parts of the commodities complex moved higher yesterday, for oil, part of the move was driven by the US Department of Energy (DoE) announcing that it will be looking to buy up to 3MMbbls of sour crude oil for the SPR. Delivery of the oil will be for August and results will be announced in June. The volumes are relatively small, particularly when you consider the DoE released more than 220MMbbls from the SPR in 2022. However, the move does show that the US administration is serious about refilling the SPR, something that the market started doubting in recent months. The latest activity data from China shows that Chinese refiners processed 14.88MMbbls/d of crude oil in April, down from 14.94MMbbls/d in March, but up 17.6% year-on-year. The month-on-month decline in refinery activity should not be a surprise due to refinery maintenance. The latest activity data and April trade data suggest that domestic apparent oil demand exceeded 15MMbls/d over the month – record levels. The numbers also suggest that crude oil inventories fell by around 300Mbbls/d in April. The IEA will release its latest monthly oil market report later today and the market will likely be focusing on whether the agency made any revisions to its demand growth forecasts for the year, given growing concerns over the outlook. In last month’s report, the IEA forecast that 2023 oil demand would grow by 2MMbbls/d – 90% of this growth is expected to come from non-OECD countries. Metals – Copper mine halts operations in China China’s Zijin Mining Group Co. said that mining operations were halted at one of its mines in Tibet following an accident. The mine is one of three mines run by Tibet Julong Copper Co. and has a total production capacity of 160kt per year. In zinc and lead, data from the International Lead and Zinc Study Group (ILZSG) show that the global zinc market remained in a supply surplus of 44kt in the first three months of the year compared to a supply surplus of 116kt a year earlier. Total refined production remained almost flat at 3.36mt, while total consumption rose by 1.7% YoY to 3.32mt between January and March 2023. As for lead, total production reported gains of 2.7% YoY to 3.08mt, while consumption fell by 1.3% YoY to 3.1mt in the first three months of the year. The lead market was estimated to have seen a marginal supply deficit of 19kt in the first quarter of the year, lower than the 143kt deficit during the same time last year. Recent data from the China Iron and Steel Association (CISA) show that steel inventories at major Chinese steel mills fell to 17.6mt in early May, down 2.8% compared to late April. Crude steel production at major mills increased by 2% in the period to 2.25mt/d in early April. Agriculture– Potential sugar release from China There are reports that the Chinese government is planning to release roughly 1mt of sugar from the state reserves given the strength that we have seen in global sugar prices. Given China is a key raw sugar importer, any significant release of sugar from government reserves potentially means lower imports from China, which would offer some relief to the global sugar market. The latest data from the Uganda Coffee Development Authority show that Uganda’s coffee shipment fell 23% month-on-month and 8% YoY to 373,610 bags of coffee (the lowest since October) in April as an early drought hit yields. Cumulative shipments for the season (October to April) stood at 3.16m bags, down 4% YoY. Read next: Disappointing activity data in China suggests more fiscal support is needed| FXMAG.COM The USDA’s weekly export inspection data for the week ending 11 May show that US corn and wheat shipments rose while soybean exports slowed over the last week. US weekly inspection of corn exports stood at 1,173.8kt, higher than the 974.5kt in the previous week and 1,060.6kt reported a year ago. For wheat, export inspections stood at 242.3kt, up from 214.5kt last week but lower than 348.9kt seen for the same period last year. Soybean export inspections stood at 147.9kt, lower than 397.8kt from a week ago and 804.1kt from a year ago. Read this article on THINK Tags Sugar Steel SPR Oil IEA Grains Copper Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bearish WASDE Report Impacting Corn, Soybeans, and Wheat

The Commodities Feed: Black Sea grain deal extended

ING Economics ING Economics 18.05.2023 11:56
The bulk of the commodities complex benefitted from the risk-on move across markets yesterday. However, wheat prices came under pressure with an extension to the Black Sea grain deal Energy - Large US crude build It was a risk-on move across markets yesterday with optimism growing that a deal will be made on the US debt ceiling. This saw ICE Brent close more than 2.7% higher on the day. The oil market continues to be driven by external developments, rather than fundamentals. The market ignored a largely bearish EIA inventory report. US commercial crude oil inventories increased by 5.04MMbbls over the week, which was more than the 3.69MMbbls build reported by the API the previous day and also more than the market was expecting. It is also the largest weekly crude build since mid-February. The changes in refined product stocks were also underwhelming, with gasoline inventories falling by just 1.38MMbbls, whilst distillate stocks increased by 80Mbbls. Demand also disappointed. Implied demand fell by 606Mbbls/d over the week. Declines were seen in gasoline, distillates and jet fuel, although for now, the 4-week average for implied gasoline and jet fuel demand is still above seasonal norms. The 4-week average for implied distillates demand has, however, dipped below the 5-year average for this time of year. Read next: Asia Morning Bites - 18.05.2023| FXMAG.COM The European gas market remains under pressure with prompt TTF falling closer towards EUR30/MWh and this is on the back of growing confidence in a comfortable balance. EU gas storage is a little over 64% full at the moment, well above the 41% seen at the same stage last year and above the 5-year average of 46%. The pressure at the front end of the TTF curve is also starting to put a lot more pressure on 2023/24 winter prices. Up until recently these forwards were holding up relatively well given concern over the balance through the 2023/24 winter. However, more recent changes in the forward curve suggest the market is becoming less concerned about the next heating season. Agriculture - Black Sea grain deal extended The Black Sea grain deal was extended yesterday for an additional 2 months, which will help ease some supply concerns in the market. However, given the short extension, the market will have to continue to deal with uncertainty over what happens next. When the Black Sea Grain Initiative was first implemented, the idea was that the deal would run for 120-day periods. An extension to the deal also does not mean that grains will flow freely. Ukraine has said that flows have slowed significantly due to issues around inspections. However, news of the extension still saw CBOT wheat settling 3.4% lower yesterday. Read this article on THINK Tags Ukraine TTF Oil Natural gas Grains EIA Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Are crude oil prices rebounding on the back of a possible debt ceiling deal?

Are crude oil prices rebounding on the back of a possible debt ceiling deal?

Craig Erlam Craig Erlam 19.05.2023 16:11
Are we seeing some bullish momentum in crude prices? Oil prices are rebounding again today alongside a slight uptick in market sentiment more broadly. Perhaps some of the confidence in Washington that a deal on the debt ceiling isn’t far away, amid “steady progress”, is filtering through to the markets, although default was almost certainly never a realistic possibility in the first place. Crude has gathered a little upward momentum over the last week or so, with prices making higher lows on the way which could be a bullish signal short term. Brent has continued to see resistance around $77-$78 though but a break of this, taking it back into December to March territory, would be encouraging, with $80 then being the next big test. Gold heading for a deeper correction? Gold prices fell again on Thursday but are seeing some support today around a very interesting support level. The yellow metal has been under pressure amid rising US yields and a stronger dollar and now it’s pulled back to $1,960, a big support zone in the second half of March and throughout April, as well as a big resistance point in early February. Read next: US GDP: The GDP number covers an odd quarter which was deceivingly strong over the first couple of months due to weather distortions| FXMAG.COM A significant break below here could be a very bearish signal in the near term, potentially signalling a much deeper correction is on the cards in the coming weeks. Another level of interest is $1,940, with a break of this further confirming that the tide has turned, with the focus then shifting back towards $1,900. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.
The Commodities Feed: Specs continue to cut oil longs

The Commodities Feed: Specs continue to cut oil longs

ING Economics ING Economics 22.05.2023 11:27
The latest positioning data shows that speculators remain bearish towards the oil market. Meanwhile, US producers continue to reduce drilling activity Source: iStockphoto Energy - Specs continue to cut Oil managed its first week of gains since mid-April. ICE Brent settled 1.9% higher over the last week, which has left it trading above US$75/bbl. Despite this, speculators remain negative towards the market with the net speculative long in ICE Brent falling by 6,020 lots over the last reporting week to 106,722 lots as of last Tuesday. This is the smallest position that speculators have held this year. Looking deeper into the data reveals that the move was driven by longs liquidating, while the gross short position is fairly sizeable at 94,880 lots. Meanwhile, ICE gasoil continued to see further short covering over the last week. Speculators bought back 7,059 lots over the last reporting week to leave them with a net short of 20,652 lots. This still leaves speculators holding a large net short in gasoil, which suggests that there is still the risk of a short covering rally. Drilling activity in the US continues to slow. The latest data from Baker Hughes shows that the oil rig count fell by 11 over the last week to 575. This is the lowest count since June 2022 and the rig count has now fallen by 48 from a YTD peak of 623 seen back in January. A slowdown in US drilling activity is a concern for the oil market, which is expected to see a sizeable deficit over the second half of this year. Producers appear to be responding to the weaker price environment, rather than expectations for a tighter market later in the year. The macro picture is also likely making producers a little more hesitant. However, the trend will be good news for OPEC+, as it suggests that they will be able to continue supporting prices without the risk of losing market share to US producers. Metals - China metal output rises Recent data from the Shanghai Futures Exchange (ShFE) shows that weekly inventories for all base metals declined over the last week. Copper weekly stocks fell by 15,872 tonnes to 102,511 tonnes as of Friday. Among other metals, weekly exchange inventories for nickel fell sharply by 48% WoW to a fresh low of 908 tonnes, while aluminium inventories fell 9% WoW, and zinc and lead stocks fell 7.6% and 20.2% WoW respectively as of Friday. The recent numbers from the National Bureau of Statistics (NBS) show that refined copper output in China rose 14% YoY to 1.06mt in April, while zinc and lead output rose 13% YoY to 594kt and 4% YoY to 614kt respectively. The latest trade data from China Customs show that imports of unwrought aluminium and products rose 27% YoY to 223kt in April. This leaves cumulative imports over the first four months of the year at 797.6kt, up 12.6% YoY. On the export side, alumina exports jumped 56.4% YoY to 70kt last month, while YTD exports have risen by 100% YoY to 380kt. This increase is driven largely by stronger flows to Russia. Agriculture – China's corn imports fall The latest trade numbers from China Customs show that corn imports declined significantly by 54.6% YoY to 1.0mt last month, which leaves cumulative imports so far this year at 8.5mt, down 8.4% YoY. While corn imports came under pressure, wheat imports surged 141% YoY to 1.68mt in April, which takes cumulative imports over the first four months of the year to 6.03mt, up 61% YoY. Read next: FX Daily: This could be another good week for the dollar| FXMAG.COM The latest CFTC data shows that money managers reduced their net bearish bets in CBOT corn by 17,658 lots over the last week to 91,985 lots as of 16 May. The move was predominantly driven by an increase in gross longs. Similarly, the speculative net short position in CBOT wheat decreased by 4,137 lots to 112,769 lots over the last reporting week. However, the pressure seen on prices since the reporting week, due to an extension in the Black Sea grain deal, suggests that speculators have likely increased their net shorts in both corn and wheat more recently. Read this article on THINK Tags Speculators Rigs Oil Metals Grains China trade Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB Hawkish Pushback and Key Inflation Test Await FX Markets

Surpassing Forecasts: Ambra Group's Strong Q3 Performance Sets Positive Outlook

GPW’s Analytical Coverage Support Programme 3.0 GPW’s Analytical Coverage Support Programme 3.0 30.05.2023 15:12
The results presented by the Company in the third quarter of the financial year 2022/23 (January - March 2023) turned out to be higher than our forecasts, especially due to better margins. At the same time, the Ambra Group once again managed to show a double-digit increase in revenues, which this time clearly exceeded the dynamics observed in the first half of the year (+22.0% y/ y).   The increase in sales was possible thanks to the earlier date of Easter (they fell on the second weekend in April - a week earlier than a year ago, which increased sales in March), regularly introduced increases in product prices and the low base from last year. Ambra positively surprised us, especially with an increase in the percentage gross margin on sales by 1.3 p.p. y/y, to 35.6% (we expected flat dynamics), and consequently also the level of operating profit (PLN 6.9 million vs. PLN 4.6 million) and net profit (PLN 2.6 million vs. PLN 1.7 million).     However, we believe that the following quarters may prove to be a greater challenge for the Group, especially when we take into account the high costs of purchasing raw materials, fuels and energy, or the deterioration of consumer sentiment caused by, among others, decline in real household income. Better-than-expected results in Q3 prompt us to raise our current forecasts. We believe that at the end of the current financial year, the Group's sales revenues will total PLN 882.3 million (13.8% y/y), EBIT will increase to PLN 95.4 million (10.9% y/y), and the net result will amount to PLN 55.8 million (7.7% y/y).       Assuming our estimated net profit in the financial year 2022/23, the Company is currently listed with a P/E ratio of 11.4. We are raising the valuation per share of Ambra from PLN 32.1 to PLN 33.6 compared to the last forecast, and we are reiterating our 'buy' recommendation. The change in the valuation of the Company was positively influenced in particular by a slight increase in our expectations as to its future results after a good third quarter, as well as a further increase in the level of ratios of companies from the comparative group.          
ECB Hawkish Pushback and Key Inflation Test Await FX Markets

Surpassing Forecasts: Ambra Group's Strong Q3 Performance Sets Positive Outlook - 30.05.2023

GPW’s Analytical Coverage Support Programme 3.0 GPW’s Analytical Coverage Support Programme 3.0 30.05.2023 15:12
The results presented by the Company in the third quarter of the financial year 2022/23 (January - March 2023) turned out to be higher than our forecasts, especially due to better margins. At the same time, the Ambra Group once again managed to show a double-digit increase in revenues, which this time clearly exceeded the dynamics observed in the first half of the year (+22.0% y/ y).   The increase in sales was possible thanks to the earlier date of Easter (they fell on the second weekend in April - a week earlier than a year ago, which increased sales in March), regularly introduced increases in product prices and the low base from last year. Ambra positively surprised us, especially with an increase in the percentage gross margin on sales by 1.3 p.p. y/y, to 35.6% (we expected flat dynamics), and consequently also the level of operating profit (PLN 6.9 million vs. PLN 4.6 million) and net profit (PLN 2.6 million vs. PLN 1.7 million).     However, we believe that the following quarters may prove to be a greater challenge for the Group, especially when we take into account the high costs of purchasing raw materials, fuels and energy, or the deterioration of consumer sentiment caused by, among others, decline in real household income. Better-than-expected results in Q3 prompt us to raise our current forecasts. We believe that at the end of the current financial year, the Group's sales revenues will total PLN 882.3 million (13.8% y/y), EBIT will increase to PLN 95.4 million (10.9% y/y), and the net result will amount to PLN 55.8 million (7.7% y/y).       Assuming our estimated net profit in the financial year 2022/23, the Company is currently listed with a P/E ratio of 11.4. We are raising the valuation per share of Ambra from PLN 32.1 to PLN 33.6 compared to the last forecast, and we are reiterating our 'buy' recommendation. The change in the valuation of the Company was positively influenced in particular by a slight increase in our expectations as to its future results after a good third quarter, as well as a further increase in the level of ratios of companies from the comparative group.          
Fed Rate Hike Expectations Wane, German Business Climate Declines

Market Update: Copper Inventory Withdrawals Tighten Spread, Saudi Arabia Raises Oil Prices

ING Economics ING Economics 06.06.2023 12:28
The Commodities Feed: Copper spread tightens on inventory withdrawals Oil prices are trading under pressure this morning on demand side uncertainties as Saudi Arabia increased the official selling price for July deliveries for all regions. LME copper continues to see inventory withdrawals as demand in Asia picks up.   Energy – Saudi increases the official selling price for oil Saudi Arabia increased its official selling price for all regions for July, a day after the nation pledged an additional oil supply cut for the same month. Saudi Aramco will sell the Arab Light crude for buyers in Asia at a US$3/bbl premium for July deliveries, an increase of US¢45/bbl compared to June 2023.The premium for the US and European deliveries has increased by US¢90/bbl, while buyers in the Mediterranean region will see an increase of US¢60/bbl. The hike in premium comes as a surprise considering ongoing demand concerns and that Saudi Arabia has been pushing for supply cuts to bring the oil market into balance.   Metals – Declining copper on-warrant stocks tighten LME spread Recent LME data shows that total on-warrant stocks for copper dropped by 17,750 tonnes – the biggest daily decline since October 2021 – for a second consecutive session to 71,575 tonnes (the lowest level in almost a month) as of yesterday. The majority of the outflows were reported from South Korea’s Busan warehouses. Meanwhile, cancelled warrants for copper rose by 18,025 tonnes after declining for three consecutive sessions to 27,375 tonnes yesterday, signalling potential further outflows. The cash/3m for copper stood at a contango of just US$4/t as of yesterday – compared to YTD highs of a contango of US$66.26/t from 23 May – indicating supply tightness in the physical market.   In mine supply, Peru’s latest official numbers show that copper output in the country rose 30.5% year-on-year (+1.2% month-on-month) to 222kt in April. The majority of the annual production gains came from the higher output levels from mines like Southern Peru Copper, the Las Bambas and Cerro. Cumulatively, copper production grew 15.7% YoY to 837.5kt in the first four months of the year. Among other metals, zinc production in the nation increased 31.4% YoY to 130.6kt in April.   In ferrous metals, the most active contract of iron ore trading at the Singapore Exchange extended its upward rally for a fifth consecutive session and traded above US$108/t this morning on speculations of more supportive steps from China to accelerate its economic growth. The recent market reports suggest that the People’s Bank of China is likely to cut the reserve-requirement ratio for banks and might also lower interest rates in the second half of the year. Meanwhile, BBG also reported that the Chinese government is preparing a new batch of measures to push growth in the property market.     Agriculture – US crop planting maintains the pace The USDA’s latest crop progress report shows that US corn plantings continue to rise with 96% of plantings completed as on 4 June, compared to 93% of planting done at this point in the season last year and the 5-year average of 91%. Similarly, soybean plantings are also growing, with 91% planted as of 4 June – well above the 76% seen at the same stage last year and the 5-year average of 76%. Meanwhile, spring wheat plantings are 93% complete. This is above the 81% planted at the same stage last season and in line with the 5-year average. Meanwhile, the agency rated around 36% of the winter wheat crop in good-to-excellent condition, up from 34% a week ago and 30% seen last year.   The USDA’s weekly export inspection data for the week ending 1 June indicated a drop in demand for US grains over last week. The agency stated that US corn export inspections stood at 1,181kt, lower from 1,346.4kt in the previous week and 1,458.5kt reported a year ago. For wheat, export inspections stood at 291.6kt, down from 391.3kt from the previous week and 355.3kt reported a year ago. Similarly, soybean export inspections fell to 214.2kt, compared to 243.1kt from a week ago and 370kt from a year ago.   The director general of the Ivory Coast's cocoa regulator, Conseil Café Cacao, stated that the domestic cocoa crop is expected to improve in 2022-23 (compared to the previous year) despite intensifying concerns about a potential outbreak of the swollen shoot virus. Ivory Coast cocoa production is stabilizing despite a slow start, taking the season's harvest projections between 2mt-2.2mt. Last week, the International Cocoa Organization (ICCO) projected an increase of 4% in Ivory Coast's cocoa output this season, reaching 2.20mt.
Treading Carefully: Federal Reserve's Rate Hike Pause, ECB and Bank of England on the Horizon

China's Imports Recover: Crude Oil, Natural Gas, and Copper Boost Market Sentiment

ING Economics ING Economics 07.06.2023 10:48
The Commodities Feed: China's imports recover China’s crude oil and natural gas imports recovered strongly in May, which could help improve market sentiment. For copper, China’s concentrate imports jumped to a fresh high, while unwrought copper imports remain soft.   Energy – China's crude oil imports recover China’s crude oil imports recovered to 51.44mt or around 12.16MMbbls/d (up 17% month-on-month and 12% year-on-year) in May 2023, as some of the refineries increased their utilisation rate after concluding maintenance. Demand slowdown from China has been a major concern for the crude oil market recently, and a recovery in oil imports is likely to provide some comfort to the oil market. Higher refinery utilisation has also increased refined product supplies in the Chinese market, with China reverting to being a net exporter of refined products last month. Among other energy products, natural gas imports into China increased 17.3% YoY to 10.6mt in May as lower gas prices in the Asian market supported demand for storage.   In its latest short-term energy outlook report, the Energy Information Administration (EIA) revised higher domestic oil production estimates, as the decision by OPEC+ to extend output cuts could push oil prices higher and bring more investments into exploration.   The administration revised higher the production estimates to 12.61MMbbls/d for 2023 compared to earlier estimates of 12.53MMbbls/d and output of 11.88MMbbls/d in 2022. For 2024, production estimates are revised higher to 12.77MMbbls/d compared to earlier estimates of 12.69MMbbls/d. On the other hand, US demand for crude oil is revised down from 20.47MMbbls/d to 20.42MMbbls/d on slow demand for distillates – although this is still higher than the 20.28MMbbls/d of consumption in 2022.   Meanwhile, the American Petroleum Institute (API) reported that the US crude oil inventories decreased by 1.71MMbbls over the last week, in contrast to market expectations for the addition of around 350Mbbls. Cushing crude oil stocks are reported to have increased by 1.53MMbbls. On the products side, API reported that gasoline and distillates inventories rose by 2.42MMbbls and 4.5MMbbls respectively over the week ending 2 June. The more widely followed EIA report will be released later today.     Metals – Chinese copper concentrate imports at record highs China released its preliminary trade data for metals this morning, which shows total monthly imports for unwrought copper fell 4.6% YoY to 444kt in May, largely on account of higher domestic production of the refined metal. Cumulatively, unwrought copper imports fell 11% YoY to 2.14mt in the first five months of the year.   Meanwhile, imports of copper concentrate rose 16.7% YoY to a fresh record of 2.56mt last month, with year-to-date imports up 8.8% YoY to 11.31mt from January to May this year. In ferrous metals, iron ore monthly imports rose 3.9% YoY (+6.3% MoM) to 96.17mt last month, while cumulative imports are up 7.7% YoY to 480.7mt from January to May.   On the exports side, China’s unwrought aluminium and aluminium products shipments fell 29.7% YoY to 475.4kt last month while year-to-date exports declined 20.2% YoY to 2.32mt in the first five months of the year. Exports of steel products jumped 41% YoY to 36.4mt from January to May this year.   Meanwhile, data from the Mines and Geosciences Bureau shows that nickel output in the Philippines rose 5.4% YoY to 3.9dmt in 1Q23 despite only a few mines being in production. The bureau reported that only 13 out of the nation’s 33 operating mines reported output for the above-mentioned period, as some were impacted by unfavourable weather conditions while few were undergoing scheduled maintenance.   However, the bureau remains optimistic about the outlook for the mining industry over the long term, following the expected recovery of the global economy and strong demand for nickel ore.     Agriculture – Chinese soybean imports surge The latest trade numbers from Chinese Customs show that soybean imports in China rose 24.3% YoY (+65.6% MoM) to a record high of 12.02mt in May. The imports surged sharply as the delayed cargoes (due to last month's strict inspections) were finally unloaded at ports. Cumulatively, soybean imports rose 11.2% YoY to 42.3mt over the first five months of the year.   Weekly data from the European Commission show that soft wheat shipments from the EU reached 28.9mt for the season as of 4 June, up 11.4% compared to 25.9mt from the same period last year. Morocco, Algeria, and Nigeria were the top destinations for these shipments. Meanwhile, the EU’s corn imports stood at 24.6mt, compared to 15.3mt reported a year ago.
The Commodities Feed: Central Banks Maintain Strong Demand for Gold as China Boosts Reserves

The Commodities Feed: Central Banks Maintain Strong Demand for Gold as China Boosts Reserves

ING Economics ING Economics 09.06.2023 08:53
The Commodities Feed: Gold demand remains firm from central banks China increased its official gold reserves by 0.5mOz in May 2023 taking total gold purchases to 2.6mOz for the current year so far.   Energy: crude oil inventory drawdown in the US The weekly report from the Energy Information Administration (EIA) shows that commercial crude oil inventories in the US dropped by 0.5MMbbls over the week to 459.2MMbbls mainly on account of higher refinery runs. The market was anticipating a build-up of 0.35MMbbls. Refinery operating rates in the US increased further over the week to 95.8% (the highest level since 2019) of their capacity, up from 93.1% a week earlier.   Higher refinery runs have helped increase the refined products supplied in the domestic market with both gasoline and distillate inventories increasing at an accelerated pace. Gasoline inventories increased by 2.7MMbbls over the last week, against market expectations of 0.4MMbbls while distillate stockpiles rose by 5.1MMbbls last week, compared with expectations for a build of 0.9MMbbls.   Crude oil imports fell by 817Mbbls/d over the week to 6.4MMbbls/d for the week ending 2 June. On the other hand, crude oil exports dropped by nearly half to just 2.5MMbbls/d for the week due to higher demand in the domestic market as well as higher competition in the overseas market. On the supply side, the EIA reported that crude oil production in the US rose by 0.2MMbbls/d to 12.4MMbbls/d in the week ending 2 June, after remaining range-bound for the last seven months. This is the highest production level since the early weeks of April 2020. The increase comes even as the number of rigs targeting oil continues to fall.   The latest data from the Petroleum Planning & Analysis Cell in India shows that petroleum products demand in the country increased 9% year-on-year to 20mt in May 2023. ear-to-date demand for petroleum products is up 5% YoY to 96.2mt over the first five months of 2023. Crude oil demand from Asia has been recovering over the last few months as the pace of interest rate hikes slows down and economic growth picks up. Earlier, China also reported firm oil demand in May 2023 which also helped sentiment.    
Commodities Update: China's Rate Cut and Potential Impact on Oil and Metals

Commodities Update: China's Rate Cut and Potential Impact on Oil and Metals

ING Economics ING Economics 13.06.2023 13:22
The Commodities Feed: China surprises with a cut in short-term rates The Environmental Investigation Agency (EIA) estimates that US shale oil production could remain flat in July, with drilled but uncompleted wells (DUCs) inventory falling further in May. For metals, China’s surprise cut in short-term rates has been supportive of prices as Beijing appears to be taking measures to support economic growth   Energy – US shale production flat In its latest drilling productivity report, the EIA estimates that US shale oil production could be flat at around 9.38MMbbls/d in July compared to an estimated 9.37MMbbls/d in June. The report also showed that drilled but uncompleted wells dropped by 30 over the month of May 2023 to 4,834 wells, the lowest level since May 2014. DUCs have been falling continuously since the start of the year with a year-to-date drop of around 270 wells since the end of 2022, reflecting lower investment in oil exploration for the year. A low inventory of DUCs could also make it challenging for the US to increase production quickly even if prices move up.   Canada is witnessing an increase in wildfires once again which could hurt oil and gas production in the region. The Alberta province reported 76 active wildfires on Monday compared to 71 on the previous Friday, while across Canada, around 431 wildfires were reported of which around 208 were reported to be out of control. Last month, the country faced an oil and gas production disruption of around 200-300Mbbls/d at one point, although some of the oil fields have subsequently restarted production since then. Spreading wildfires could increase disruption again this month as well. The WCS discount over the WTI has dropped back to US$12.9/bbl currently after increasing to around $15/bbl at the start of the month.
KGL's Strong Q1 Results Raise Earnings Forecasts, But Long-Term Concerns Linger

KGL's Strong Q1 Results Raise Earnings Forecasts, But Long-Term Concerns Linger

GPW’s Analytical Coverage Support Programme 3.0 GPW’s Analytical Coverage Support Programme 3.0 20.06.2023 08:31
Financial results of KGL in the first quarter were better than our expectations, but above all they indicated a noticeable improvement compared to the poor last year. Particularly noteworthy is the return of the margin in the key production segment to a level slightly exceeding 20%.   If we combine this with a similarly satisfactory distribution margin of 12.6%, the company managed to achieve the highest gross profit on sales in history. There are many indications that a successful Q1 heralds a good year, although we remain cautious about the company's long-term prospects and the possibility of maintaining margins in the longer term.   Nevertheless, after a successful start to the year, we are raising our earnings forecasts for the full year. The company's results are supported both by the market situation in the form of a decrease in the prices of raw materials and energy, but also by the positive results of the optimization carried out. We are therefore increasing our valuation per KGL share from PLN 14.2 to PLN 16.6. At the same time, at the current price of PLN 14.5 per share, we maintain our accumulate rating.     Our valuation and recommendation assume stabilization of margins in the coming years at lower levels than at present. The strategic position of the company remains difficult due to the fact that its key suppliers and customers remain much larger than it, which means their strong negotiating position.   At the same time, the recently observed favorable environment due to the decline in the prices of petroleum products will not last forever. On the other hand, the company improved the management of selected risks that hit it last year and moved margins in the manufacturing segment to record lows.     In the medium term, KGL also benefits from the SUP directive adopted by the Polish parliament, which forces the replacement of polystyrene packaging used in gastronomy with products manufactured by the company. In distribution, a higher share of technical plastics in sales improves margins, albeit at a noticeably lower value of the segment's revenues.   In the longer term, however, the risk related to the possibility of introducing restrictions on selected categories of plastic products remains high. The Management Board of KGL undertook actions which led to the reduction of the company's debt. The concluded sale and leaseback transaction will result in a one-off profit on the transaction in the amount of approx. PLN 5 million, which will be booked in the second quarter. Therefore, it seems that the first half of this year will be very successful for the company.   Only later will it be possible to verify whether the optimization measures introduced by the company will actually achieve lasting success. Especially if in the meantime they were put to the test by changing the market environment to a less favorable one.   Risk factors: The most important risk factors that may affect the operations of KGL company include:     ❑ Regulatory risks. The EU tries to influence the limitation of the use of plastic and increase the share of its recycling through restrictions and taxes. The impact of these regulations on the company is difficult to determine at the moment without knowing the details of the regulations being implemented. The fact that plastic is negatively perceived by lawmakers is certainly a threat to the industry.     ❑ Risk of exchange rates and commodity prices. A significant part of goods and materials is purchased in foreign currencies (mainly EUR). Due to higher liabilities in EUR than receivables in EUR, the unrealized negative exchange rate differences with a 1% increase in EUR / PLN would amount to approx. PLN 0.5 million (sensitivity at the end of 2022). The prices of raw materials depend to a large extent on oil prices. As a result of the increase in oil prices, the company's revenues and costs are rising, but at the same time the margin decreases and the net effect is negative.     ❑ The risk of rising remuneration costs and shortage of employees. The share of employee costs in total costs in 2022 remained above 19%, despite a significant increase in the share of energy prices in the total cost. As a result of employee shortages and wage pressure, the increase in the cost of salaries reached as much as 27% in 2021. As a result of optimization, the company managed to reduce the growth dynamics in 2022, but it remained at a two-digit level of 10%. Due to demographic trends and high inflation, tensions in the labor market will continue.     ❑ The risk of a conflict of interest. In the company, four long-term managers and founders hold a total of 85.1% of votes at the company's AGM. Additionally, four members of the supervisory board have family ties to them. In such a situation, there is a risk of a conflict of interest at the expense of minority shareholders (mitigated by two independent members of the supervisory board).     ❑ Risk of over-indebtedness. After 4 years of intensive investments, the company significantly increased its interest debt, which reached the level of 5.1x EBITDA at the end of 2022. This ratio fell in Q1 to 3.8x EBITDA, but it should still be considered elevated. However, the company took steps to reduce it by concluding a sale and leaseback transaction.   The risks that we consider to be high include regulatory issues (political decisions are quite unpredictable and have a large impact on the company), indebtedness and the risk of commodity prices.  
Euro-dollar Support Tested Amidst Rate Concerns and Labor Strikes

The Commodities Feed: Key US CPI Release and Oil Market Outlook

ING Economics ING Economics 12.07.2023 09:02
The Commodities Feed: Key US CPI release The oil market rallied more than 2% yesterday, leaving it at the top end of its recent trading range. US CPI data later today will be key for price direction in the immediate term.   Energy: Oil looking to breakout Oil prices pushed higher yesterday with ICE Brent trading to its highest level since early May and leaving it within striking distance of US$80/bbl. A break above US$80/bbl would see the market finally breaking out of the US$70-80/bbl range that it has been stuck in for more than two months. The market appears to be finally starting to reflect the tighter fundamentals that we see over the second half of 2023. Obviously, additional cuts announced by Saudi Arabia last week will be helping, while hopes of support measures for China’s economy will be offering some further optimism. However, macro developments are still likely to be key for the market in the near term. And today there will be plenty of focus on US CPI numbers. Expectations are for a print of 3.1% year-on-year for June, down from 4% in the previous month. We will need to see the number come in well below consensus to see any significant change to current expectations for the Federal Reserve to hike at its next meeting. API numbers released overnight were more bearish than expected, with US crude oil inventories increasing by 3MMbbls, while gasoline and distillate stocks also increased by 1MMbbls and 2.91MMbbls, respectively. The market had been expecting some small draws across crude and products. The more widely followed EIA inventory report will be released later today, but obviously, it is likely to be overshadowed by the US CPI release. Bloomberg ship tracking data shows that Russian seaborne crude oil exports fell by a little more than 1MMbbls/d WoW to 2.86MMbbls/d for the week ending 9 July. This also drags the four-week rolling average down to a little over 3.2MMbbls/d, which is the lowest level seen since January. The market will be watching Russian exports closely, as up until now there have been doubts over whether Russia is actually making the full supply cuts it announced earlier in the year. Yesterday, the EIA released its latest Short Term Energy Outlook, in which it forecasts 2023 US crude oil production to grow by 680Mbbls/d YoY to average a record 12.56MMbbls/d. Meanwhile, for 2024, supply growth is expected to slow to a little over 280Mbbls/d YoY, which would see output averaging 12.85MMbbls/d. This ties in with the slowdown in drilling activity that we have seen for much of this year. The number of active oil rigs in the US has fallen from a year-to-date high of 623 in January to 540 last week.
EUR/USD Faces Resistance at 1.0774 Amid Inflation and Stagflation Concerns

Two Views on Inflation: Nuanced Perspective and Diverging Strategies

ING Economics ING Economics 12.07.2023 09:34
The problem for rates markets is that, much like the leading/lagging indicators dichotomy, there are two ways to look at today’s report. With base effects and energy pulling the headline annual number back very close to 3% (if consensus is to be trusted), investors are likely to be showered with headlines of the ‘inflation is back to its lowest level since early 2021’ kind.   The reality is more nuanced. A 0.3% monthly rate on both the headline and core readings is consistent with 3.6% annual inflation. Progress, but celebration is premature when the source of inflation is now moving to much less mean-reverting components, and last month’s job report suggests wages are not letting up either.   If the BoE hikes by another 50bp in August, there is room for curve inversion   Higher for longer vs panic hikes There are two ways to deal with stubbornly high inflation and an economy that, so far at least, doesn’t seem that bothered by the amount of policy tightening delivered in this cycle. One is the Fed’s. In short, signalling that the peak is near but that rate cuts are still a long way away. This isn’t an easy message to deliver, but the Fed has had some success. The curve still prices 125bp of easing in 2024, and the Fed’s ‘dot plot’ signals 100bp. If the strategy is to signal ‘higher for longer’ rates, this may well be the next target for the Fed.   Contrast that with the BoE’s 50bp hike last month. It’s an open question whether this hike will be repeated in August. Next week’s inflation print, especially the services component, is widely seen as the final piece of the jigsaw. A repeat would speak to a different strategy to the Fed’s, whereby rates are raised to however high is necessary in order not to lose credibility. With policy rates already at 5%, confidence that rates will eventually drag on the economy is growing. To us, this points to differing curve dynamics, where the US short-end curve may well re-steepen to reflect steady policy rates for a longer period of time, while the UK curve should invert further.     Today's events and market view Ahead of a busy Northern American calendar, this morning’s list of European events is rather thin. Spain’s CPI reading will be a final release, and BoE Governor Andrew Bailey’s speech should be focused on financial stability, and so less likely to comment on recent data. Bond supply today will come from the UK, US, and Germany selling 10Y debt, and Portugal selling bonds with 2029 and 2035 maturity. The main dish on today’s economic menu will be the US CPI report where the core and headline readings are still expected to grow at a 0.3% monthly pace, which annualises to 3.6%. The annual headline figure converging to 3% for the first time since March 2021 may be what headlines focus on, however. The Bank of Canada’s (BoC) decision to restart its hiking cycle in June after a five-month hiatus is largely expected to be followed by another 25bp hike. Any indicator on the pace of future hikes will likely be parsed by investors in other currencies, seeing the BoC as a bellwether for other developed market central banks.
USD Weakness Boosts Commodity Complex as Oil Supply Disruptions Drive Prices Higher

USD Weakness Boosts Commodity Complex as Oil Supply Disruptions Drive Prices Higher

ING Economics ING Economics 14.07.2023 08:38
The Commodities Feed: USD boosts the complex The commodity complex continues to move higher, aided by the weakness seen in the USD since the US CPI release. For oil, supply disruptions have provided a further boost to the market.   Energy – Oil supply disruptions grow Oil continues to move higher thanks to tailwinds from the below consensus CPI report earlier this week along with weakness in the USD. ICE Brent is now trading above US$81/bbl, the highest levels seen since late April. Brent is set for its third consecutive week of gains. It is not just macro factors driving crude at the moment. Chinese trade data for oil was constructive with flows significantly higher year-on-year and also up month-on-month. In addition, there are some renewed supply concerns. Both Libya and Nigeria are seeing disruptions at the moment. In Libya, both the Sharara and El Feel oil fields are in the process of being shut down due to protests spreading in the country. These fields have a combined production capacity of around 370MMbbls/d. Meanwhile in Nigeria, Shell has suspended operations at its Forcados oil terminal due to a possible leak. The terminal was set to ship 220Mbbls/d of crude in July. Combined, these disruptions are significant and will be felt in a market that is already set to tighten. There is also uncertainty over whether we will see reduced appetite for Russian crude oil, given that Urals are now trading above the G7 price cap. Western shipping and insurance services can only be used for crude priced under US$60/bbl. Russia has tried to blunt the impact of the price cap by securing alternative shipping capacity, but only time will tell how successful it has been in doing so. Both the International Energy Agency (IEA) and OPEC released their monthly oil market reports yesterday. The IEA revised lower its demand growth forecasts for 2023 by 220Mbbls/d to 2.2MMbbls/d, which still leaves oil demand this year at record levels. This should also mean that the oil market still tightens up over the second half of 2023. As for 2024, the IEA expects oil demand to grow by 1.1MMbbls/d. OPEC are more bullish on oil demand, revising up their demand growth forecasts for 2023 slightly to 2.44MMbbls/d, whilst for 2024 the group expects oil demand to grow by 2.25MMbbls/d. This is quite aggressive when considering the uncertain macro outlook. In Europe, refined product inventories in the ARA region have declined for the fifth consecutive week, falling by 53kt over the last week to 5.65mt. Gasoline stocks fell by 30kt over the week to 1.34mt, although stocks are still comfortable and well above the 5-year average. However, middle distillates continue to tighten. Jet fuel stocks in ARA fell by 20kt to 730kt, which is the lowest level seen at this stage of the year since 2018. Meanwhile, gasoil inventories fell by 29kt over the week to 1.93mt, which is around 371kt below the 5-year average. These draws continue to offer good support to the gasoil market, with the crack remaining above US$20/bbl whilst the prompt time spread remains in backwardation.
Commodities Feed: Chinese Data Weighs on Market, Black Sea Grain Deal Ends

Commodities Feed: Chinese Data Weighs on Market, Black Sea Grain Deal Ends

ING Economics ING Economics 18.07.2023 08:33
The Commodities Feed: Black Sea Grain deal ends Chinese data weighed on most of the commodities complex yesterday, raising further demand concerns. Even grain markets settled lower, having rallied initially on the back of Russia pulling out of the Black Sea Grain deal.   Energy – Norwegian gas flows recover Yesterday’s price action in oil following the release of weaker-than-expected Chinese GDP numbers demonstrated well that demand is still the key concern for the oil market. This is particularly the case when it comes to China, given it makes up the bulk of expected demand growth this year. However, as we pointed out in yesterday’s note, drilling deeper into the numbers suggests oil demand in China over June was fairly strong with implied demand growing almost 14% year-on-year. Despite the stronger demand and higher refinery run rates, China still managed to add around 2MMbbls/d of crude oil to inventories over the month – the largest build since May last year. The Energy Information Administration (EIA) released its latest drilling productivity report yesterday, in which it forecasts that US shale oil production will fall in August by 18Mbbls/d month-on-month to 9.397MMbbls/d. The decline is set to be driven by Eagle Ford and the Permian. Given the slowdown in drilling activity since December last year, it shouldn’t be too surprising that it will have an impact on supply growth. In addition, the EIA also reported that the number of drilled but uncompleted wells (DUCs) fell by 24 over June to 4,804, the lowest since June 2017. European gas prices came under further pressure yesterday with TTF falling more than 3% to leave prices trading a little over EUR25/MWh. This is after maintenance work at the Nyhamna gas processing plant in Norway finished over the weekend, allowing for Norwegian gas flows to Europe to recover. Norwegian gas flows are back above 320mcm/d, which is the highest level since mid-April. There is a fair amount of further maintenance scheduled for August, which will likely see flows reduce once again. But for now, the resumption of flows has helped European storage build at a quicker pace in the last few days. EU storage is now almost 82% full, well above the five-year average of almost 67% full for this time of year. In the absence of any unexpected supply disruptions, the EU will fill storage well ahead of the next heating season
US Retail Sales Boost Prospects for 3% GDP Growth, but Challenges Loom Ahead

Commodities Update: Copper Supply Tightness and Stable EU Gas Inventory

ING Economics ING Economics 31.07.2023 15:53
The Commodities Feed: Supply tightness could support copper Codelco has lowered its copper production guidance for the year due to production disruptions that could tighten the market. Meanwhile, copper inventories at LME and SHFE remain low.   Energy: EU gas inventory continues to increase at a stable pace Crude oil prices continued positive momentum on Friday and ended the week on a high note with ICE Brent rising to around US$85/bbl while NYMEX WTI also strengthened to US$80.6/bbl. Market expectations of an extension of the supply cut by Saudi Arabia remain supportive of oil prices in the immediate term. The price discount for Western Canada Select (WCS) crude oil over the WTI increased to around US$15.3/bbl last week as an unplanned outage and advanced maintenance schedule at BP’s Whiting refinery fuelled pessimistic sentiment. BP had to shut the 100Mbbls/d cat feed hydrotreater plant on Friday, which could push the maintenance schedule for the refinery from September to August. The 435Mbbls/d Whiting refinery is one of the major refiners of Canadian crude and early maintenance at the plant could result in lower demand for Canadian crude in the short term. Higher discounts also reflect the additional cost of transportation as the crude travels further for refining. TTF gas prices retreated to below €26/MWh on Friday after increasing to €32.6/MWh earlier in the week. The supply side remains healthy, as reflected by inflows of gas into storage tanks. The EU gas inventory increased by another 22.6TWh over the week, taking the gas storage to 85.4% full as of 29 July. European gas storage currently is comfortably above the five-year average of around 70% for this point in the season. The gas injection has been consistent at around 20-23TWh per week for the last two months and at this rate, European gas storage could reach near-full capacity by the end of September 2023. Meanwhile, the discount of European gas prices compared to Asian LNG prices increased to an average of around US$2.1/MMBtu in July compared to an average of around US$0.3/MMBtu in June 2023. The higher discount in the European gas market could help divert more LNG cargoes towards Asia and reduce the supply glut in the European market.    
Hungarian Industrial Production Shows Surprise Uptick in Summer

Commodities Update: Copper Retreats from Three-Month High Amid Weak China Manufacturing Data

ING Economics ING Economics 01.08.2023 13:11
The Commodities Feed: Copper drops from three-month high after weak China manufacturing data Copper dropped from a three-month high this morning after weak manufacturing data from China added to concerns over the economic recovery in the world’s biggest metal consumer.   Energy: European economic data helps sentiment ICE Brent maintained the positive trend yesterday and settled at a fresh three-month high of US$85.6/bbl on supply-side risks combined with a positive set of economic data from Europe. Eurozone inflation dropped further to 5.3% in July compared to 5.5% in June and the economics team at ING believes that inflation should be materially lower towards the end of the year. Meanwhile, EU GDP growth returned to positive territory last quarter at 0.3% quarter-on-quarter compared to negative 0.1% in the preceding quarter. On the supply side, the Alberta Energy Regulator reported that crude oil production in Alberta, a major crude oil production region in Canada, dropped by 21% year-on-year to 2.7MMbbls/d in June 2023. The June production numbers do not include production from Suncor, one of the largest producers in the country. Meanwhile, the suspense over Saudi’s plan for September production continues, and the market is waiting for any hint or confirmation during the OPEC+ Joint Ministerial Monitoring committee meeting that is scheduled for this Friday. On the products side, recent market reports suggest that oil processing rates in Russia could move higher in August, as major refineries complete their ongoing spring maintenance and as refineries maximise the operating rates to take advantage of the final month of full government subsidies. Russia has announced it will cut subsidies in half for domestic supplies of diesel and gasoline from September through 2026.
Why India Leads the Way in Economic Growth Amid Global Slowdown

The Commodities Feed: Risk-Off Sentiment Weighs on Energy and Metals as US Oil Inventories Record Steep Decline

ING Economics ING Economics 03.08.2023 14:44
The Commodities Feed: Risk-off sentiment weighs on the complex The overall risk-off sentiment has weighed on the commodity complex with both energy and metals facing the pressure. US crude oil inventory dropped by a record 17MMbbls last week, reflecting a tight physical market.   Energy – US weekly oil inventories report record declines The oil market came under pressure yesterday and traded weak this morning as rising US Treasury yields and strength in the USD index overshadowed a record drop in the US crude oil inventories. The weekly petroleum status report from the Energy Information Administration (EIA) was constructive for the oil market and shows that US commercial crude oil inventories dropped by a record 17MMbbls over the last week to 439.8MMbbls, the lowest since January and around 1% below the five-year average for this time of the year. The market was anticipating a drawdown of just 0.8MMbbls while the American Petroleum Institute (API) reported a withdrawal of 15.4MMbbls the day before. Meanwhile, oil inventories at Cushing, Oklahoma, fell by 1.3MMbbls for a fifth consecutive week to 34.5MMbbls, the lowest since the first week of May. The inventory withdrawal mainly comes amid a backdrop of a jump in exports which increased to around 5.3MMbbls/d last week compared to 4.6MMbbls/d in the preceding week. The majority of the demand came from Asian refiners as they boosted the purchase of US oil following the output cuts by OPEC+ members. As for refined product inventories, gasoline inventories rose by 1.5MMbbls, against a forecast for a decline of 1.3MMbbls, while distillate stockpiles fell by 0.8MMbbls last week, higher than expectations of a decline of 0.3MMbbls. Meanwhile, refineries operated at 93.5% of their capacity, up from 93.1% in the previous week and 92.9% for the same period last year. Domestic crude oil production remained largely unchanged at 12.2MMbbls/d last week.    
EUR: Range-bound Outlook Amid Tightened Swap Rate Gap

Energy Market Updates: LNG Supply Risks and OPEC Oil Market Outlook

ING Economics ING Economics 11.08.2023 10:11
The Commodities Feed: LNG supply risks linger Natural gas prices are likely to remain volatile in the coming days, at least until there is some clarity surrounding potential strike action at a number of Australian liquefied natural gas (LNG) facilities.   Energy – OPEC sees deficit over remainder of 2023 Oil prices came under some pressure yesterday with ICE Brent settling a little more than 1.3% lower on the day. This is despite OPEC releasing its monthly oil market report which suggests that the market will continue to tighten for the remainder of the year. OPEC made little in the way of changes to its global oil demand forecasts for the rest of this year and for 2024. However, the group did revise higher its 2023 non-OPEC supply estimates by a little more than 100Mbbls/d on the back of upward revisions to Russian supply. OPEC numbers suggest that demand for OPEC oil over the third quarter will be 29.56MMbbls/d, which is well above the 27.31MMbbls/d that OPEC produced in July. The call on OPEC output grows to 30.74MMbbls/d in the fourth quarter, whilst over 2024, the group’s numbers suggest demand of 30.08MMbbls/d for OPEC oil. Given the current production targets of OPEC+ until 2024, these numbers suggest global oil inventories will draw for the remainder of this year and over 2024. The International Energy Agency (IEA) will publish its latest monthly oil market report later today, where it will share its latest outlook for the market.   The significant cuts that we are currently seeing from OPEC+ continue to be supportive for medium sour crudes. The Brent-Dubai spread remains in negative territory and in fact has traded to a discount of more than US$1.20/bbl – lower than the levels seen during 2020, when OPEC+ made significant cuts. The weakness in Brent relative to Dubai should mean that Atlantic Basin crudes should be more appealing to Asian buyers. It is difficult to see any significant reversal in the spread before Saudi Arabia starts unwinding its additional voluntary supply cuts. Having rallied significantly earlier in the week, following supply risks around Australian LNG, the European gas market gave back some of these gains yesterday, with TTF settling more than 6.6% lower on the day. The European gas market remains in a comfortable situation with storage more than 88% full and it is clear that the region will hit its target of 90% by 1 November, well ahead of schedule. However, the market will still need to keep a close eye on how labour negotiations progress in Australia. The potential for prolonged industrial action at a number of Australian LNG facilities could put a little over 10% of global LNG supply at risk, and given Europe’s growing reliance on LNG, this would (as already seen in recent days) have an impact on European gas prices as Asian buyers compete more aggressively for alternative supply.
National Bank of Poland Meeting Preview: Anticipating a 25 Basis Point Rate Cut

China Macro Concerns Impact Commodities: Natural Gas Surges Amid Supply Uncertainty

ING Economics ING Economics 16.08.2023 11:17
The Commodities Feed: China macro concerns grow Weak Chinese data yesterday weighed heavily on the commodities complex. However, there was an exception: European and Asian natural gas prices rallied on continued uncertainty over Australian LNG supply.   Energy: Natural gas spikes higher once again The effects of weaker-than-expected Chinese macro data rippled through the commodities complex yesterday, including oil. ICE Brent settled more than 1.5% lower on the day with worries over what this weak data means for the Chinese economy and oil demand. In addition, much stronger-than-expected US retail sales likely led to some questions over whether the US Federal Reserve may still have a bit more to do when it comes to policy tightening.   API data released overnight was more constructive, with US crude oil inventories falling by 6.2MMbbls over the last week, quite a bit more than the roughly 2.5MMbbls draw the market was expecting. In addition, Cushing crude oil inventories fell by 1.03MMbbls, whilst for products, gasoline stocks declined by 761Mbbls and distillate inventories increased by 658Mbbls. The more widely followed EIA weekly report will be released later today. Natural gas prices continue to trade in a volatile manner. TTF settled more than 12% higher yesterday with growing concerns over the risk to Australian LNG. There was no breakthrough in talks yesterday to avoid strike action and so clearly the risk of supply disruptions is growing. We should get more clarity on the situation towards the end of the week. However, the European market is in a very good position. European storage is basically 90% full now, hitting the European Commission’s goal about two and a half months before the target date. It is looking as though European storage will essentially be full before the start of the next heating season and so we would expect to see renewed downward pressure on prices, particularly once there is some clarity around Australia.  
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China's Disappointing Macro Data Casts Shadows on Commodities Market

ING Economics ING Economics 16.08.2023 11:59
The Commodities Feed: China macro data disappoints The complex came under some pressure due to USD strength yesterday, and renewed concerns over the Chinese economy certainly won’t help.   Energy - Chinese refiners increase run rates The oil market traded in a fairly choppy manner yesterday, with ICE Brent trading slightly above US$1.20/bbl. China concerns and a stronger USD ensured some downward pressure not just for oil, but the broader commodities complex. Chinese data out this morning is unlikely to help soothe concerns, with both industrial production and retail sales coming in below expectations. Industrial production increased 3.7% YoY in July, compared to expectations of 4.3%, whilst retail sales grew by just 2.5% YoY, well below expectations of 4%. Oil-specific data from China was more supportive though, with it showing that refiners processed around 14.93MMbbls/d of crude oil in July, up more than 31% YoY and also higher than the 14.89MMbbls/d processed in June. Our numbers suggest that this is the second highest number on record, with a record 14.94MMbbls/d processed in March this year. In addition, apparent oil demand came in at about 14.76MMbbls/d, up more than 35% YoY, but less than 1% lower MoM. The numbers also suggest that China drew down crude oil inventories by a little more than 500Mbbls/d over July, this is after fairly strong builds in both May and June. Shell finally resumed crude oil exports from the Forcados terminal in Nigeriaon Sunday. Operations at the terminal were suspended for a little over a month following the discovery of leaks. The terminal had been scheduled to ship in the region of 220Mbbls/d in recent months. The resumption of these flows will do little to help the tightness in the medium sour crude market, given that Forcados crude is a medium sweet crude. There is some optimism that a deal between the US and Iran on the release of 4 US citizens from an Iranian prison and the expected unfreezing of Iranian funds overseas could potentially lead to some progress with the Iranian nuclear deal. The failure to reach a nuclear deal on a number of occasions in recent years leaves us reluctant to assume a significant increase in Iranian oil supply. Even with current sanctions, Iran has increased supply from an average of around 2.5MMbbls/d in 2022 to a little more than 2.8MMbbls/d in July 2023. Prior to the re-implementation of US sanctions, Iran was producing in the region of 3.8MMbbls/d. The EIA released its latest drilling productivity report yesterday in which it estimated that US shale oil production will fall by 20Mbbls/d to 9.415MMbbls/d in September. The slowdown shouldn’t come as too much of a surprise given the decline in drilling activity for much of this year. Meanwhile, the number of drilled but uncompleted wells (DUCs) fell by 5 over July to 4,787- the lowest number since April 2014. Whilst well completions did increase MoM, drilled wells also fell over the course of the month.
Market Outlook: Oil Price Trends and Gold Amid Global Economic Uncertainties - 21.08.2023

Market Outlook: Oil Price Trends and Gold Amid Global Economic Uncertainties

Ed Moya Ed Moya 21.08.2023 12:26
Energy The oil price rally that has been in place since June has ended.  Energy traders will focus on the latest problems from China, the global flash PMIs, the Jackson Hole Symposium, and the BRICS summit.  After having an interrupted rally from $68 to $84, WTI crude looks poised to consolidate around the $80 region as traders grapple with a tight market that is facing headwinds from world’s two largest economies.  Following the Jackson Hole gathering, it will be clear if the bond market selloff continues or cools down.  If the global economic outlook become even more pessimistic, oil might give up a good portion of the recent rally. Natural gas prices remain fixated over strike action at an LNG facility in Australia. Fresh talks between Woodside Energy and union officials are expected to begin on August 23rd.  Natural gas will remain volatile until we have a handle on how gas availability will be for the winter.   Gold Gold traders will closely watch the annual Jackson Hole Symposium and how aggressive China becomes with providing support to the deepening property crisis. The global bond market selloff has sent gold prices sharply lower over the past month but that could stabilize if we get a dovish Fed Chair Powell and as long as China doesn’t disappoint with the next wave of stimulus. Spot gold has fallen below the $1900 level, but momentum selling has slowed. Gold traders are also fixating over the $1900 level for gold futures. Currently, gold futures are only $45 away from their March lows, while spot gold is around $80 away. For gold selling pressure to remain, global bond yields might need to surge higher.    
Market Outlook: Oil Price Trends and Gold Amid Global Economic Uncertainties - 21.08.2023

Market Outlook: Oil Price Trends and Gold Amid Global Economic Uncertainties - 21.08.2023

Ed Moya Ed Moya 21.08.2023 12:26
Energy The oil price rally that has been in place since June has ended.  Energy traders will focus on the latest problems from China, the global flash PMIs, the Jackson Hole Symposium, and the BRICS summit.  After having an interrupted rally from $68 to $84, WTI crude looks poised to consolidate around the $80 region as traders grapple with a tight market that is facing headwinds from world’s two largest economies.  Following the Jackson Hole gathering, it will be clear if the bond market selloff continues or cools down.  If the global economic outlook become even more pessimistic, oil might give up a good portion of the recent rally. Natural gas prices remain fixated over strike action at an LNG facility in Australia. Fresh talks between Woodside Energy and union officials are expected to begin on August 23rd.  Natural gas will remain volatile until we have a handle on how gas availability will be for the winter.   Gold Gold traders will closely watch the annual Jackson Hole Symposium and how aggressive China becomes with providing support to the deepening property crisis. The global bond market selloff has sent gold prices sharply lower over the past month but that could stabilize if we get a dovish Fed Chair Powell and as long as China doesn’t disappoint with the next wave of stimulus. Spot gold has fallen below the $1900 level, but momentum selling has slowed. Gold traders are also fixating over the $1900 level for gold futures. Currently, gold futures are only $45 away from their March lows, while spot gold is around $80 away. For gold selling pressure to remain, global bond yields might need to surge higher.    
The Commodities Feed: Iranian Oil Flows Rise Amid Market Headwinds, Natural Gas Volatility Ahead

The Commodities Feed: Iranian Oil Flows Rise Amid Market Headwinds, Natural Gas Volatility Ahead

ING Economics ING Economics 23.08.2023 10:00
The Commodities Feed: Iranian oil flows edge higher The oil market continues to face headwinds, both on the macro front and on the back of expectations of supply increases. Meanwhile, the natural gas market could see further volatility over the coming days with a deadline for labour talks at some LNG facilities approaching.   Energy - Deadline Day for some Australian LNG talks The rally in oil appears to have run out of steam for now. China's macro issues, along with a growing expectation that maybe the US Fed is not done with its tightening cycle have weighed on oil more recently. In addition, the broader strength in the USD will be providing some headwinds. Fundamentally, the outlook for the market is still constructive with large deficits to persist for the remainder of the year. However, there is some noise around growing supply, specifically from Iran. Iran has quietly increased its output by around 400Mbbls/d over the last year to a little over 2.9MMbbls/d, which is the highest level since late 2018. Iran has said that it will look to increase output to around 3.4MMbbl/d by the end of summer, which would leave it close to pre-sanction levels of 3.8MMbbls/d. Given much of the focus has been on Russian flows since the war, Iran has taken advantage of this to increase oil exports. This comes against the backdrop of apparently greater willingness between the US and Iran to improve diplomacy, evident with a recent deal for a prisoner swap and the release of frozen Iranian funds. There is also further noise around the potential restart of Iraqi oil flows via the Ceyhan export terminal in Turkey. The flows were halted back in March after a court ruled in favour of the Iraqi government, which claimed that these oil flows from the Kurdish region were happening without its consent. Iraqi and Turkish officials have been meeting this week with the hope of resuming the roughly 500Mbbls/d of crude oil that flows via this route. API numbers released overnight show that US crude oil inventories fell by 2.4MMbbls, slightly less than the roughly 3MMbbls draw the market was expecting. Crude oil stocks at Cushing continue to decline, having fallen by 2.1MMbbls over the week. For refined products, gasoline inventories grew by 1.9MMbbls, while distillate stocks edged lower by 153Mbbls. The more widely followed EIA report will be released later today. Natural gas markets should get more clarity around Australian LNG supply over the next 24 hours, given that end-of-day Wednesday is the deadline that workers at Woodside’s North West Shelf gave to come to a deal. As a result, we could see further volatility in natural gas prices for the remainder of the week. We should also get more clarity on how negotiations at Chevron’s Gorgon and Wheatstone are developing later this week.  
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FX Analysis: Dollar Index Holds Above 200-DMA, EURUSD on Bearish Path, Energy Market Remains Uncertain, Nvidia Earnings Awaited

Ipek Ozkardeskaya Ipek Ozkardeskaya 23.08.2023 10:08
In the FX  The dollar index remains bid above its 200-DMA – though we see a slowing positive trend, and weakening trend and momentum indicators. While I believe that there is room for further USD recovery, we could well see a temporary downside correction in the next few days, depending on what Powell will say, and how the markets will react. The EURUSD is still on a decidedly bearish path. Trend and momentum indicators remain comfortably bearish, and the pair is not yet at the oversold market conditions; the actual selloff could extend toward the 200-DMA, near the 1.08 mark. The USDJPY is steady a touch above the 145 mark, as the possibility of a direct FX intervention holds many traders back from topping up their short yen positions. Cable on the other hand sees resistance at its 50-DMA, a touch below the 1.28 mark.  In energy, the US crude remains close to the $80pb psychological mark, lacking a clear short-term direction. Therefore, this week's US inventories report could help traders decide whether they want to play the slow China demand rhetoric or continue backing the supply tightness narrative. In both cases, we shall see range-bound trading within the $75/85 range, including the 200-DMA and the August peak.     Nvidia goes to the earnings confessional!  Today, all eyes are on Nvidia earnings due after the closing bell. Investors will focus on whether Nvidia's Q2 sales meet the $11bn estimate. Anything less than absolutely fantastic could trigger a sharp downside correction in Nvidia's stock price which rallied 345% since the October dip.      
Tokyo Core CPI Falls Short at 2.8%, Powell and Ueda Address Jackson Hole Symposium, USD/JPY Sees Modest Gains

Tokyo Core CPI Falls Short at 2.8%, Powell and Ueda Address Jackson Hole Symposium, USD/JPY Sees Modest Gains

Kenny Fisher Kenny Fisher 28.08.2023 09:22
Tokyo Core CPI gains 2.8%, less than expected Powell and Ueda to speak at Jackson Hole symposium USD/JPY has posted small gains on Friday, enough to push above the symbolic 146 line. On the data calendar, Tokyo Core CPI dipped lower and Fed Chair Powell addresses the Jackson Hole Symposium later today.   Tokyo Core CPI eases to 2.8% Japan released the Tokyo Core CPI earlier today. This is the first inflation release of the month, making it a key event. In August, Tokyo Core CPI rose 2.8% y/y, down from 3.0% in July and just under the consensus estimate of 2.9%. Despite the drop in inflation, the indicator has remained above the Bank of Japan’s 2% target for some fifteen months. Earlier in the month, the so-called “core-core index”, which excludes fresh food and energy, remained at 4.0%. This points to broad inflationary pressure and raises questions about the BoJ’s insistence that inflation is transient. The BoJ has said it will not exit its ultra-loose monetary policy until wage growth rises enough to keep inflation sustainable around 2%. Still, the markets have been burned before by the BoJ making unexpected moves and are on guard for the BoJ tightening policy, especially with the yen at very low levels. The markets are keeping a close eye on the Jackson Hole symposium, with Fed Chair Powell and BoJ Governor Ueda both attending. Powell delivers a key speech on Friday and Ueda will participate in a panel discussion on Saturday. If either one provides insights into future rate policy, it could mean some volatility from USD/JPY on Monday. What does the Fed have planned? That depends on which Fed member is addressing the media. Philadelphia Fed President Patrick Harker said on Thursday that he didn’t see a need to raise rates further, absent any unexpectedly poor data, but added that the Fed wouldn’t be lowering rates anytime soon.  However, Boston Fed President Susan Collins said that rate increases might still be necessary. The Fed is likely to pause at the September meeting, but what happens after that is unclear.       USD/JPY Technical USD/JPY is facing resistance at 146.41, followed by 147.44 There is support at 145.54 and 144.51  
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

ING Economics ING Economics 31.08.2023 10:15
The Commodities Feed: US crude oil inventories drop The oil market edged higher yesterday, though the move was fairly modest when you consider the large draws seen in US crude oil inventories along with growing supply risks in West Africa.   Energy - Large US crude draw The latest EIA numbers show that US commercial crude oil inventories fell by 10.58MMbbls over the last week, which leaves total crude oil inventories at 422.94MMbbls - the lowest level since December 2022. Crude oil inventories at Cushing also saw further declines, falling by 1.5MMbbls, which takes crude oil stocks at the WTI delivery hub to below 30MMbbls and to a level last seen in January. Lower imports and higher exports were largely behind the large draw. As for refined products, gasoline inventories fell by 214Mbbls over the week, whilst distillate fuel oil stocks increased by 1.24MMbbls. This build was despite refiners reducing their run rates over the course of the week. Gasoline demand was stronger over the week, with implied demand increasing by 158Mbbls/d WoW, taking it back above 9MMbbls/d. This might be short-lived, with hurricane activity in Florida this week possibly weighing on demand. Elsewhere, there are growing supply risks after a military coup in Gabon. The West African country is an OPEC member and produces around 200Mbbls/d. While the volumes are relatively small, clearly any disruption in what is already a tight market does not help. However, up until now, there have been no reports of disruptions to the oil supply. In the coming days, the market should receive more clarity on what Saudi Arabia will do with its additional voluntary cut of 1MMbbls/d. This cut was first implemented in July for a month, but the Saudis have rolled it over a couple of times already. Our expectation is that Saudi Arabia will extend this cut through into October. There are clearly still some broader demand concerns and returning this supply to the market could see Brent back below US$80/bbl - something the Saudis would prefer not to see.  
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Oil Market Approaches $90/bbl Amid Saudi Cuts

ING Economics ING Economics 04.09.2023 10:44
The Commodities Feed: Oil cuts and LNG supply risks The oil market continues to move closer to US$$90/bbl. A possible rolling over of Saudi cuts could see it finally break this level. Gas markets will get some more clarity this week on Australian LNG with workers at 2 facilities set to go on strike as soon as this Thursday if unions and Chevron fail to come to a deal.   Energy - Saudi oil cuts The oil market had a strong week last week with ICE Brent managing to settle 4.82% higher, which also saw the market almost hit US$89/bbl and trading to its highest level since January. Support would have come from growing expectations that the Fed could be done with its hiking cycle. In addition, fundamentals remain constructive with the oil market set to continue to tighten for the remainder of the year. This tightening is largely due to OPEC+ supply cuts. However, whilst OPEC continues to cut, there are some producers within the group who continue to see output edge higher (Iran, Libya and Venezuela - these members are exempt from current supply cuts). Preliminary OPEC production data for August is starting to come through and the Bloomberg survey shows that the group increased output by 40Mbbls/d MoM to 27.82MMbbls/d. While Saudi output is estimated to have fallen by 130Mbbls/d to 8.98MMbbls/d, this was offset by increases from Iran and Nigeria. Iranian output is estimated to have increased by 90Mbbls/d to 3.07MMbbls/d. Nigerian output increased by 80Mbbls/d to 1.34MMbbls/d. This week the oil market will be focused on what Saudi Arabia decides to do with its additional voluntary cut of 1MMbbls/d. The Saudis will need to decide whether to roll this cut into October, let it expire at the end of September or gradually ease the cut from next month. We believe that the Saudis will likely roll over the cut into October, as they will not want to put any renewed downward pressure on the oil market, although fundamentally, the market should be able to absorb the return of these barrels, given the large deficit forecast for the rest of the year. The latest positioning data shows that speculators reduced their net long in ICE Brent by 15,544 lots over the last reporting week, leaving them with a net long of 202,227 lots as of last Tuesday. However, given the move in the market since then, along with the increase in open interest, the actual speculative net long has likely increased. Natural gas prices also remain fairly well supported with a combination of continued supply risks around Australian LNG as well as reduced Norwegian gas flows due to ongoing maintenance at fields. Strike action at the Gorgon and Wheatstone LNG facilities in Australia could start as soon as this Thursday if unions and Chevron do not come to an agreement.  
The Commodities Feed: Delayed LNG Strike Action and Tightening Oil Market Fundamentals

The Commodities Feed: Delayed LNG Strike Action and Tightening Oil Market Fundamentals

ING Economics ING Economics 08.09.2023 10:17
The Commodities Feed: LNG strike action delayed The oil market has shrugged off the weakness seen in equity markets with strong fundamentals continuing to support prices. Meanwhile, European gas prices came under pressure yesterday with delayed strike action at Australian LNG facilities raising hopes that parties could come to a deal.   Energy - Saudis increase prices into most regions Sentiment in the oil market remains constructive after Saudi Arabia and Russia decided to extend their voluntary supply cuts by three months. ICE Brent managed to edge higher yesterday, settling at US$90.60/bbl, whilst the Brent Dec’23/Dec’24 spread continues to surge, settling at a backwardation of US$7.28/bbl, up from less than US$4/bbl in late August. The strength in time spreads is clearly indicating tightness in the oil market. Our balance sheet shows that the market remains in deep deficit through until year-end, before moving back into a small surplus in 1Q24. While this surplus may lead to some price weakness early next year, we believe that it will be short-lived with the market set to return to deficit over the latter part of 2024.   Following the extension of Saudi cuts and the tightness in the market, it was no surprise that Saudi Arabia increased its official selling prices (OSP) for most grades of its crude into most regions. The flagship Arab Light into Asia saw its OSP raised by US$0.10/bbl MoM to US$3.60/bbl over the benchmark for October - the highest level seen so far this year. All other grades into Asia also saw increases, while similar action was taken for grades into the US and Med. Europe was the only region which saw some relief, with OSP’s for all grades cut. API data released overnight was constructive, showing that US crude oil inventories fell by 5.5MMbbls, This is larger than the roughly 2MMbbls draw the market was expecting. In addition, crude oil inventories at the WTI delivery hub, Cushing, declined by 1.35MMbbls. On the product side, gasoline stocks fell by 5.1MMbbls, while distillate stocks increased by 300Mbbls. The increase in distillate stocks was marginal but will help ease some concern over low middle-distillate inventories as we head into the northern hemisphere winter. The more widely followed EIA inventory report will be released later today.   Natural gas prices came under significant pressure yesterday with TTF falling by almost 10%. This is after growing optimism that strike action at two of Chevron’s LNG facilities in Australia may be avoided. Partial strike action was meant to start at Gorgon and Wheatstone today. However, this has been delayed until tomorrow as the company and unions continue to work towards a deal. The two facilities make up around 6% of global LNG supply so the market continues to watch these developments closely. The European market will also have to deal with lower Norwegian gas flows for a little bit longer than originally anticipated. Field maintenance at several fields, including Troll has been extended by a couple of days. Total Norwegian flows are around 137mcm/day, compared to more than 300mcm/day in mid-August.
The AI Race: US vs. China in the Battle for Technological Dominance

The AI Race: US vs. China in the Battle for Technological Dominance

Saxo Bank Saxo Bank 12.09.2023 11:09
The AI race between the US and China Vladimir Putin said in 2017 that whoever becomes the leader in AI will become the ruler of the world. Russian leaders are experienced in hyperbolic language, so this prediction should naturally be discounted, but AI will likely play a crucial role in the great power competition of the future. Reading articles about technology and AI from those years around 2017, it is clear that the world thought China was either leading the AI race or at least had the speed to overtake the US in a few years. Surprisingly, it turned out, that the US was leading everyone else, as AI systems such as OpenAI’s GPT-4 and Google’s Bard are crushing AI systems from China across many benchmark tests. As we described in our previous Quarterly Outlook, the future will be dictated by what we call the fragmentation game, which is essentially a strategic geopolitical dynamic fragmenting the world into regions with a higher degree of independence and with national security interests driving policies around four pillars: defence, energy, technology, and commodities. The fragmentation game is mostly a game evolving around how the physical world operates and it is a game in which Europe and the US are aiming to reduce China’s role in their respective supply chains. While it causes headwinds for China, it creates tailwinds for other countries, which is well crystalised in our chart showing Chinese equity market performance vs those countries that are benefitting.     Inside the fragmentation game framework, semiconductors also play a crucial role because they are the very foundation for AI chips. The capital expenditures on semiconductors will create an investment boom in the US and Europe over the next decade, as the regions will increase domestic production to limit dependencies on Asia. This dynamic will benefit semiconductor equipment makers as their revenue figures are linked to capital expenditures on semiconductors. Regardless of the rollercoaster experience investors will have with AI stocks, one thing is certain: this technology will be an important technological battleground between the US and China, and many opportunities and threats will arise in the years to come.  
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Oil Market Analysis: Nearing $100 a Barrel Amidst Tightening Fundamentals

ING Economics ING Economics 19.09.2023 13:32
The Commodities Feed: Why oil could soon hit $100 a barrel The oil market continues to edge higher with US$100/bbl certainly in play, given constructive fundamentals and positive sentiment.   Energy: Brent timespreads strengthen Oil prices remain well supported, with ICE Brent edging closer towards US$95/bbl as the market continues to become increasingly concerned over the tightness in the oil balance for the remainder of the year. The tightness in the market is also well reflected in the structure of the forward curve. The curve is moving deeper into backwardation with the prompt Brent spread trading in a backwardation of close to US$1.20/bbl, up from just US$0.60/bbl at the start of last week. Meanwhile, the Dec’23/Dec’24 spread is also edging closer towards a backwardation of US$10/bbl. Tightening fundamentals have attracted speculators back into the market with both the managed money net position as well as the spreading position seeing meaningful increases over the last reporting week. Given the constructive fundamentals and more positive sentiment, we could see ICE Brent breaking above US$100/bbl in the not-too-distant future. However, such a move would likely be unsustainable, leading to growing political pressure, whilst the Saudis and the broader OPEC group will probably not want to push the market too high, given the demand destruction risks this could create. The EIA’s latest drilling productivity report estimates that US shale oil production will fall by 40Mbbls/d MoM to 9.39MMbbls/d in October, which would be the third consecutive month of declines. Given the decline seen in the US rig count throughout the year, this trend shouldn’t be too surprising. Meanwhile, the report also showed that the number of drilled but uncompleted wells (DUCs) fell by 39 over the month to 4,479 at the end of August, the lowest level since March 2014. There was a fall in both drilling as well as completions over the month.
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Commodities Under Pressure: Yields and USD Strength Dictate Trends

ING Economics ING Economics 05.10.2023 08:22
The Commodities Feed: It's all about the yields The ‘higher-for-longer’ narrative for rates is pressuring the commodities complex, while the accompanying USD strength is adding further pressure.   Energy - Steady OPEC output The oil market struggled yesterday. ICE Brent settled a little more than 1.6% lower on the day as rising treasury yields and USD strength proved to be too much of an obstacle for the market. Technically, the Brent December contract still needs to fill the gap left following the November contract expiry on Friday. If that happens, it would take the front-month contract back above US$95/bbl. Preliminary OPEC production data for September is starting to come through. The Bloomberg survey showed that output increased by 50Mbbls/d MoM to 27.97MMbbls/d. Nigeria showed the largest increase over the month. Their supply grew by 60Mbbls/d, while Iran saw a marginal pullback in output of 50Mbbls/d. Output is likely to remain relatively steady over October. Further out, the market will be focused on any sign that Saudi Arabia is starting to unwind its voluntary additional supply cuts. There was a bit more noise yesterday around the resumption of Northern Iraqi oil flows through the Ceyhan pipeline. Turkey has said that flows could resume this week. However Iraqi officials have thrown cold water on the idea, saying that there are still some issues that need to be resolved before this can happen. The pipeline can carry almost 500Mbbls/d of crude oil from the Kurdish region to the Ceyhan export terminal. Flows were suspended back in March after the Iraqi government won an international arbitration ruling, stating that these flows were occurring without approval from the Iraqi government Metals - Gold plunges to seven-month low Gold plunged to its lowest level since March yesterday - edging closer to US$1,800/oz, as treasury yields continued to move higher and the USD also strengthened.  The higher-for-longer narrative has been putting significant pressure on gold, which is leading to a significant reduction in investment appetite reflected by the large declines in gold ETF holdings in recent months. Fed policy will remain key to the outlook for gold prices in the months ahead.
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Challenges Ahead: Decreased Cash Buffer, Low Reverse Yankee and Corporate Hybrids Supply in 2024

ING Economics ING Economics 27.10.2023 15:01
Decreased cash buffer The significant cash levels on the books of many corporates (due to large funding done in 2019-2021) have been depleted, and thus the buffer is lower. This means refinancing costs could increasingly become a problem in 2024, particularly for high-yield issuers and real estate issuers. This also creates an element of urgency to get funding done.  Low Reverse Yankee supply expected Much like this year, we don’t expect Reverse Yankee supply to play a dominant role. Thus, we are not likely to see additional supply pressure coming from US issuers. As elaborated on below, we forecast just €40bn in 2024. Low Corporate hybrids supply expected Similarly, looking at Corporate hybrids, we also don’t expect a large level of supply. On the back of still very high refinancing costs, we are forecasting only €15bn in 2024, as detailed below. Insignificant volume of assets and liabilities management exercises expected An insignificant volume of assets and liabilities management exercises are expected in 2024, as the current high-yielding environment and wide spread levels leave very little attraction. Low M&A activity expected We expect M&A activity will remain at low levels in the first half of the year, and perhaps pick up in the second half of the year. Small rise in CAPEX is forecasted CAPEX levels are expected to rise in both EUR and USD IG, as shown below. The rise is indeed marginal but does play a role in the expectation of a small increase in supply. The growth in CAPEX is very much driven by Financials, Energy, Industrials, Utilities and Consumers.   Disintermediation trend to remain
The Commodities Feed: Oil trades softer

The Commodities Feed: Lingering supply risks in the oil market despite a weak start to the week. Geopolitical tensions in the Middle East play a crucial role in shaping the short-term outlook

ING Economics ING Economics 02.11.2023 11:51
The Commodities Feed: Lingering supply risks The oil market started the week on a weak footing. However, geopolitical risks remain elevated and the short-term outlook remains dependent on developments in the Middle East.   Energy - supply risks remain The oil market came under significant pressure yesterday with ICE Brent settling 3.35% lower on the day, while WTI traded down to its lowest level since the Israel-Hamas conflict. This is despite the fact that there are clear upside risks still facing the market in the current geopolitical environment. Disruptions to Iranian oil flows remain the most obvious risk to the market, which could see anywhere between 500k b/d and 1m b/d of supply lost if the US were to strictly enforce sanctions once again. Up until now, developments in the Middle East have yet to impact oil supply. In the absence of supply disruptions from the region, it is difficult to see a significant and sustained upside in prices. Also important for the market are developments in Venezuela. Recently, the US decided to ease sanctions against Venezuela in return for the promise of fairer elections in 2024. The expectation was that the lifting of these sanctions could see Venezuela increase its oil supply in the region of 200k b/d. However, overnight, the supreme court in Venezuela suspended the results of the opposition’s primary elections, which will likely call into question whether the sanctions relief provided to Venezuela will remain in place.   On the calendar for today, December Brent futures expire and the API will also release weekly US inventory data. In addition, markets will await China’s official PMI data which will be released this morning. Expectations are for the manufacturing PMI to come in at 50.2 for October, unchanged from the previous month. A second consecutive reading in expansion territory will likely go down well with markets, showing some further signs of firming by the Chinese economy.
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The Commodities Feed: Positive Economic Sentiment Boosts Prices, OPEC Oil Output Stable

ING Economics ING Economics 02.11.2023 14:58
The Commodities Feed: Positive economic sentiment helps to boost prices The Fed’s decision to keep interest rate hikes on pause for a second consecutive time has bolstered economic sentiment and supported commodity prices, including energy and metals. Fresh mine closures have provided additional support to zinc, with prices climbing to around US$2,600/t yesterday.   Energy – OPEC oil output held stable ICE Brent has been trading firm this morning on positive economic sentiment after the US Fed continued to pause interest rate hikes. The hawkish tone remains in the accompanying statement. Lower crude oil inventory in the US and Europe also continued to be supportive of crude oil prices. Preliminary OPEC production numbers for October suggest a broadly stable output as the modest increases across most of its African members offset the declines elsewhere. According to a Bloomberg survey, OPEC output increased by 50Mbbls/d MoM to 28.1MMbbls/d last month. Nigeria led the gains, with their production rising by 60Mbbls/d to 1.5MMbbls/d followed by Venezuela (+30Mbbls/d), Congo (+20Mbbls/d) and Gabon (+20Mbbls/d). The output additions were partially offset by declining production in Iraq (-40Mbbls/d), Iran (-30Mbbls/d), Kuwait (-20Mbbls/d) and Libya (-20Mbbls/d). The latest numbers from the EIA weekly inventory report show that US commercial crude oil inventories increased by 0.8MMbbls over the last week. Earlier, API reported an inventory build of 1.35MMbbls while the market expected a build of around 1MMbbls. Total crude oil inventory (excluding SPR) at around 421.9MMbbls remains about 5% below the five-year average at this point in the season. US crude oil production remained unchanged at 13.2MMbbls/d. As for refined products, gasoline stocks rose by 0.1MMbbls, while distillate stocks fell by 0.8MMbbls. US refinery utilization softened further to around 85.4% as refineries aim to complete maintenance activity before winter demand kicks in.
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Oil Market Faces Headwinds: Brent Hits Lowest Since July as Supply Worries Ease

ING Economics ING Economics 08.11.2023 14:14
The Commodities Feed: Oil under pressure The oil market came under significant pressure yesterday. Brent traded down to its lowest level since July, while WTI broke below $80/bbl. There are signs that the oil balance is looking less tight and this comes at a time when concerns over supply disruptions from the Middle East ease.   Energy - Brent plummets The oil market came under significant pressure yesterday. ICE Brent settled 4.19% lower on the day and traded to its lowest level since July. Meanwhile, NYMEX WTI settled below US$80/bbl for the first time since August. The market is clearly less concerned about the potential for Middle Eastern supply disruptions and is instead focused on an easing in the balance. Prompt time spreads have weakened, suggesting a less tight physical market. And while there are clear demand concerns hovering over the market, supply dynamics have also played a role. For example, Russian seaborne crude oil exports have grown in recent months, which suggests that Russia is not sticking to its additional voluntary cut. The recent price weakness is likely to lead to growing noise from OPEC+ and in particular from Saudi Arabia. Whilst Saudi Arabia and Russia confirmed that they would continue with their additional voluntary cuts through until the year-end, it is increasingly likely that they will extend this into the new year if this downward pressure continues. The Saudis would like to keep Brent above US$80/bbl, as this is roughly where their fiscal breakeven price is. Our oil balance shows that the market will be in surplus in 1Q24, so further cuts are something we could certainly see. The weakness seen yesterday is likely to continue today. The API released inventory numbers overnight which were bearish. US crude oil inventories increased by 11.9MMbbls over the last week, while Cushing crude oil stocks grew by 1.1MMbbls. For refined products, gasoline inventories fell by 400Mbbls and distillate fuel oil stocks increased by 1MMbbls. The more widely followed EIA inventory report will be released later today. In the EIA’s latest Short-Term Energy Outlook, there was little change to US crude oil production estimates. US crude oil output is expected to average 12.9MMbbls/d this year, up 1MMbbls/d YoY, while supply growth is expected to be much more modest next year, increasing by less than 250Mbbls/d to average 13.15MMbbls/d Chinese October trade data released yesterday showed a fall in the trade surplus last month with weaker exports. However, imports were stronger, including crude oil. Crude oil imports averaged 11.58MMbbls/d in the month, up 3.7% MoM and 13.5% higher YoY. This leaves cumulative imports for the year at 11.41MMbbls/d, up 14.4% YoY. Stronger imports over the course of this year may reflect a recovery in domestic demand, while there will also be a fair amount of stock building.  
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Commodities Update: Oil's Resilience and Grain Market Pressures

ING Economics ING Economics 10.11.2023 10:00
The Commodities Feed: Oil finds some support Oil prices appear to have found some support after comments from the Saudi energy minister yesterday who suggested demand remains healthy. Meanwhile, grain prices came under pressure with a relatively bearish WASDE release.   Energy - Oil finding some support ICE Brent has managed to claw its way back just above US$80/bbl, whilst prompt timespreads have also bounced back a bit. Comments from the Saudi energy minister yesterday appear to have provided some comfort to the market, with the minister stating that oil demand remains healthy and that the move lower seen in oil prices has been driven by speculators rather than fundamentals. The minister stated that increased exports from the Middle East does not reflect increased output, but rather a seasonal trend as stronger summer demand in the Middle East eases. We believe that the scale of the sell-off in oil is exaggerated given that fundamentals are still tight at least in the short term. However, fundamentals are not as bullish as originally anticipated with Russian oil exports edging higher, whilst refinery margins have also been weakening. Middle distillates remain tight despite the more recent weakness in cracks. Gasoil inventories in the ARA region fell by 47kt last week to 1.72mt, according to data from Insights Global. This leaves inventories at similar levels to those seen at the same stage last year, and around 24% below the 5-year average. The middle distillate market remains vulnerable as we head deeper into the northern hemisphere winter.
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Italian Industrial Production Remains Stable in September, Anticipating a Soft Economic Patch

ING Economics ING Economics 10.11.2023 12:48
Italian industrial production was stable in September September's industrial production data and October survey data suggest that the soft economic patch will remain in place over the fourth quarter, with downward pressure on goods as the only positive fallout. The soft patch in Italian industry continued in September, according to Istat’s data. Seasonally-adjusted production was flat on the month, and the working days adjusted measure was down 2% on the year. In September, production was 3% lower than at the pre-Covid peak. A quick look at big industry aggregates shows a sharp monthly decline in consumer goods (-2.2% month-on-month), offset by increases in investment goods (+1.5% MoM), intermediate goods (+0.3% MoM) and energy (+1.1% MoM). The manufacturing breakdown shows that previous patterns in yearly changes have been broadly confirmed: sectors which had been particularly penalised by supply chain disruptions such as the transport equipment industry continued to rebound, while those more exposed to developments in construction activity, such as wood and non-metal mineral products, continue to suffer. The view on the quarter, a modest 0.2% gain in production in the third quarter over the previous one, does not add anything relevant to what we already knew from the value added provided by the preliminary estimate of 3Q23 GDP. Looking ahead, high-frequency confidence data for October suggests that manufacturing weakness will likely remain in place over the last quarter of 2023. Softening orders are reportedly weighing on current and expected production, pointing to a possible negative contribution of manufacturing to value added generation over the last quarter of 2023. If this is confirmed, the stagnating economic environment looks set to persist over the fourth quarter, with a small negative growth reading remaining a possibility if services take a downward direction. The one positive feature of the ongoing manufacturing soft patch is that this adds downward pressure to goods inflation, possibly bringing forward gains in real disposable income.
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OPEC+ Tentatively Agrees to 2.2 Million Barrels per Day Cut, but Skepticism Prevails as Full Compliance Appears Unlikely

Kenny Fisher Kenny Fisher 04.12.2023 14:50
OPEC+ unofficially agree to 2.2 million barrel per day cut Full compliance with cuts already looks unlikely Brent continues to consolidate near recent lows Oil prices remain quite volatile but more importantly, not too far from their recent lows after traders judged yesterday’s announcement from OPEC+ with some skepticism. The lack of an official announcement, with details gradually appearing from individual member states indicated there’s no firm commitment to the 2.2 million barrel per day cut. And Angola insisting straight after it won’t comply further solidified that view. Saudi Arabia will be hoping that others will, in the main comply, after it committed to extending its one million barrel cut until the end of March, while Russia increased its export reduction from 300,000 to 500,000. But it seems traders either aren’t buying that members will be compliant or don’t view it as being sufficient. Or, of course, that the lack of formal commitment hints at fractures within the alliance which could impact its ability to hit its targets, let alone cut further if necessary. If Brent breaks below its November lows, it will be perfectly clear what markets think of the deal.   rent was testing a big area of resistance ahead of the OPEC+ announcement but has since headed lower creating a very interesting setup. Brent Crude Daily Source – OANDA on Trading View An imperfect inverse head and shoulders appears to be forming with the neckline around the 200/233-day simple moving average band (red). It was also an important area of support over the last few months. A move below the recent lows around $77 though would be a very bearish development, especially against the backdrop of the OPEC+ deal.

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