. Daily Commodity Analysis - Oil Plummets, Gold Struggles, Gas Hits Low

Daily Commodity Analysis – Oil Plummets, Gold Struggles, Gas Hits Low

Daily Commodity Analysis – Oil Plummets, Gold Struggles, Gas Hits Low

13 Dec 2023

Introduction

“In today’s market focus, we delve into the intricate dynamics of key commodities, exploring the latest trends and influences on oil, gold, natural gas, and soybean prices. The energy sector faces headwinds as oversupply concerns persist, while gold grapples with uncertainties ahead of a crucial Federal Reserve meeting. Meanwhile, natural gas experiences a significant drop amid record output and mild weather forecasts. In the agricultural sphere, soybean prices slide on news of anticipated rains in Brazil. Join us for a comprehensive overview of the market landscape, where geopolitical factors, economic data, and weather patterns intertwine to shape the trajectory of these essential commodities.”

Markets In Focus Today – Crude

“Oil Prices Weaken Amidst Concerns of Excess Supply Ahead of Federal Reserve Meeting”

Oil prices continued their decline on Wednesday in Asian trading, extending losses after a more than 3% drop to six-month lows in the previous session. Oversupply and demand concerns were cited as the main factors. Brent crude futures for February fell 0.45% to $72.91 a barrel, while U.S. West Texas Intermediate crude futures for January dropped 0.42% to $68.32 a barrel by 0621 GMT. The market faced pressure as higher-than-expected U.S. inflation readings for November suggested the Federal Reserve might not cut interest rates early next year, impacting consumption. Oversupply concerns intensified with the weekly average of Russian crude exports reaching the highest level since July, casting doubt on the recent output cut agreement by OPEC+. The U.S. Energy Information Administration raised its 2023 supply forecast by 300,000 barrels per day to 12.93 million barrels per day, contributing to a bearish outlook. This extends the trend of seven consecutive weeks of oil price declines. The Federal Reserve’s policy meeting on Wednesday will influence market direction, with concerns that a more hawkish stance could further decrease crude prices. Although the Fed is expected to keep rates on hold, investors will closely watch officials’ views on the economy and future interest rates. Markets have priced in “aggressive rate cuts” for 2024, and any deviation from this expectation may strengthen the U.S. dollar, impacting the risk environment and leading to a decline in oil prices. Suvro Sarkar from DBS suggests that the Fed discussions are unlikely to bring surprises, and prices could see a recovery in a “relief rally” after the meeting. Other geopolitical factors, including a UN resolution for an immediate ceasefire in Gaza, rising shipping costs in the Red Sea due to Houthi attacks, and the ongoing COP28 negotiations on fossil fuels, contribute to the complex landscape influencing oil prices.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 71.15 | Negative Crossover | Bearish
  • MA 20 : 73.39 | Negative Crossover | Bearish
  • MA 50 : 77.48 | Negative Crossover | Bearish

Simple :

  • MA 10 : 71.36 | Negative Crossover | Bearish
  • MA 20 : 73.76 | Negative Crossover | Bearish
  • MA 50 : 79.20 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 31.27 | Neutral Zone | Neutral

Stochastic   Oscillator : 9.99 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 81.48 R2 : 84.18
  • S1 : 66.95 S2 : 64.93

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Buy : 66.95 | Take Profit : 64.93 | Stop Loss : 68.50

Gold

Gold prices are currently held below the $2,000 mark, with uncertainty looming over the outlook as the Federal Reserve meeting approaches.

Gold prices remained below crucial levels on Wednesday as concerns about non-yielding assets intensified ahead of the Federal Reserve’s final meeting for the year. The recent strength in the labor market and persistent U.S. inflation weakened expectations of an early interest rate cut by the central bank in 2024. Although the Fed is expected to maintain current rates later in the day, uncertainty surrounds its outlook for 2024. The Fed’s ambiguity has led to volatile swings in gold prices this month, briefly reaching record highs above $2,100 an ounce before experiencing significant sell-offs. Recent losses caused the precious metal to drop below the coveted $2,000 an ounce level, particularly as the U.S. dollar regained strength in anticipation of the Fed’s decision. As of 00:26 ET (05:26 GMT), spot gold stabilized at $1,979.06 an ounce, while gold futures expiring in February remained unchanged at $1,993.70 an ounce. The market is closely watching signals from Fed Chair Jerome Powell regarding the future path of interest rates through 2024. Powell, despite acknowledging progress against inflation, has maintained a stance of “higher-for-longer” on rates. Any hawkish indications from Powell could unsettle gold markets, especially as doubts grow about a rate hike by March 2024. Futures prices for Fed funds show a 43% chance of a rate cut in March, a significant decrease from the 60% probability priced in the previous week. Higher interest rates negatively impact gold as they increase the opportunity cost of investing in the precious metal. In the realm of industrial metals, copper prices continued to decline amid little optimism regarding China, the top importer. Copper futures expiring in March fell by 0.4% to $3.7782 a pound. Concerns over worsening disinflation in China contributed to significant losses in copper prices this week. Despite Chinese officials promising additional stimulus measures, markets remained skeptical due to Beijing’s slow implementation of supportive measures throughout the year. The ongoing economic challenges in China, the world’s largest copper importer, raised fears of reduced demand for the metal.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 2001.61 | Negative Crossover | Bearish
  • MA 20 : 2000.89 | Negative Crossover | Bearish
  • MA 50 : 1977.88 | Negative Crossover | Bearish

Simple :

  • MA 10 : 2015.01 | Negative Crossover | Bearish
  • MA 20 : 2008.48 | Negative Crossover | Bearish
  • MA 50 : 1969.51 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 44.04 | Neutral Zone | Neutral

Stochastic   Oscillator : 2.21 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 2052.82 R2 : 2082.09
  • S1 : 1958.07 S2 : 1928.79

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Buy : 1964 | Take Profit : 1939 | Stop Loss : 1972

NATURAL GAS

U.S. natural gas prices tumbled 5% to a six-month low due to record output levels and forecasts predicting mild weather conditions.

On Tuesday, U.S. natural gas futures experienced a roughly 5% decline, reaching a six-month low. This drop was attributed to record-high gas production and forecasts predicting milder weather, leading to lower-than-expected heating demand. The anticipation of utilities leaving more gas in storage through late December contributed to the decrease, with analysts estimating approximately 7.8% more gas in storage than the seasonal average. Front-month gas futures for January delivery on the New York Mercantile Exchange closed at $2.311 per million British thermal units (mmBtu), down 12.0 cents or 0.49%. This marked the lowest settlement since June 12, continuing a bearish trend that began signaling weeks ago that winter prices had likely peaked in November. The front-month contract entered technically oversold territory with a Relative Strength Index (RSI) below 30 for five consecutive days, a pattern not seen since February. Record production levels and substantial gas in storage led to bearish signals, with the collapse of the premium of futures for March over April nearing zero cents per mmBtu. This spread, known as the “widow maker,” reflects the transition from the winter storage withdrawal season to the summer storage injection season, often influenced by changing weather forecasts. The premium of futures for 2029 over 2024 rose to a record high for the third consecutive day. Analysts foresee potential price increases in the coming years as demand for gas grows, driven by new U.S. liquefied natural gas (LNG) export plants entering service in the U.S., Canada, and Mexico. However, for 2024, demand forecasts were adjusted downward following Exxon Mobil’s delay in LNG production at its Golden Pass export plant. In the spot market, next-day prices at the AECO hub in Alberta dropped to their lowest levels since October 2022. LSEG reported a rise in average gas output in the Lower 48 U.S. states for December, but daily output was expected to decline, potentially marking the largest one-day drop since early November. Meteorologists projected warmer-than-normal weather through December 27, leading LSEG to forecast a decrease in U.S. gas demand, including exports, from 123.7 bcfd this week to 122.8 bcfd next week. Despite the current decline, gas flows to major U.S. LNG export plants increased in December, reaching an average of 14.6 bcfd.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 2.39 | Negative Crossover | Bearish
  • MA 20 : 2.53 | Negative Crossover | Bearish
  • MA 50 : 2.70 | Negative Crossover | Bearish

Simple :

  • MA 10 : 2.41 | Negative Crossover | Bearish
  • MA 20 : 2.56 | Negative Crossover | Bearish
  • MA 50 : 2.86 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 20.93 | Buy Zone | Bullish

Stochastic   Oscillator : 9.72 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 3.09 R2 : 3.27
  • S1 : 2.3 S2 : 2.15

Trade Suggestion : Limit Buy : 2.3990 | Take Profit : 2.1501 | Stop Loss : 2.6055

CORN

Soybean prices declined for the second consecutive session due to forecasts of rain in Brazil.

Chicago soybean futures extended their decline on Wednesday, marking a second consecutive session of losses. This downward trend was influenced by forecasts predicting rain in certain dry areas of Brazil, a significant oilseed-producing region. The rain outlook alleviated concerns about dry weather negatively impacting the newly planted soybean crop. Corn and wheat futures also experienced a slide in response to the changing weather conditions. The most-active soybean contract on the Chicago Board of Trade (CBOT) was down by 0.2% at $13.21-1/4 a bushel as of 0411 GMT. Corn lost 0.2% to $4.84-1/4 a bushel, and wheat slid 0.1% to $6.24-3/4 a bushel. According to a Singapore-based trader, the expectation of rains in previously dry areas of Brazil has removed some of the weather-related premium from the market. The trader suggested that if the weather in Brazil continues to improve, soybean prices may decline further. While heat and dryness have adversely affected crops in northern and central regions of Brazil, recent forecasts on Tuesday indicated a more favorable outlook with increased precipitation. Brazil holds a key position as the world’s largest soybean exporter. Dry weather in recent weeks had raised concerns about the soybean crop and prompted China, a major buyer, to increase purchases from the United States. The U.S. Department of Agriculture (USDA) confirmed daily sales of 198,000 metric tons of U.S. soybeans to unknown destinations in its latest announcement, marking the fifth consecutive session of reported soy sales to China or unknown destinations. Additionally, France is expected to experience a significant decline in the sowing of winter cereals due to heavy rain disrupting field work, as reported by the farm ministry on Tuesday. Commodity funds were reported as net buyers of CBOT wheat and corn futures contracts on Tuesday, while they were net sellers of soybean, soyoil, and soymeal futures.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 4.76 | Negative Crossover | Bearish
  • MA 20 : 4.78 | Negative Crossover | Bearish
  • MA 50 : 4.88 | Negative Crossover | Bearish

Simple :

  • MA 10 : 4.77 | Negative Crossover | Bearish
  • MA 20 : 4.76 | Positive Crossover | Bullish
  • MA 50 : 4.88 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 46.86 | Neutral Zone | Neutral

Stochastic   Oscillator : 60.06 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 490 R2 : 512
  • S1 : 470 S2 : 440

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Buy : 470 | Take Profit : 440 | Stop Loss : 480

Elsewhere In The Commodity Market

Silver declined to a 4-week low of $22.656 per troy ounce, marking a decrease of -$0.08 (-0.36%) from the previous trading session. Over the past four weeks, silver has experienced a loss of -1.80%, and looking at the last 12 months, its price has decreased by -5.14%.

Key Economic Events & Data Release Today:

7:00PM(IST-USD-PPI m/m, Core PPI m/m