Weekly Commodity Update

The overall sentiment for this week led most commodities into positive territory. The rally in equities, and selloff in government bonds, helped breathe a sigh of relief for markets in general, which appeared to be over stretched and instilled with some fear. The market appears to have factored in the positive Non-farm payrolls out of the US, however also seems to continuing the positive momentum based on the positive data.

All in all, commodities have been very receptive to the positive data, posting gains in Crude Oil and the grains.
However, the previous negative sentiment has put some pressure on gold prices and has led to some profit taking. The long term daily trend, set back from July, will become significant at the 1.232 USD price level. As uncertainty leaves the market and we enter into a risk-on type scenario, it is not inconceivable that gold could come under some pressure, albeit it stemmed from positive fundamental data.

Crude oil fought off the weekly lows on the longer term trend to post a positive week. This comes on the back of yet another build in the weekly inventory data. The stock levels can typically prove to be poor short term indicators for price direction, which can only be confirmed by this week’s price action. The long term remains intact, with the positive equities markets and economic sentiment once again fueling expected future demand.
The unfortunate new fire at a platform in the Gulf of Mexico also provided support for oil prices, adding to the uncertainty to drilling and production practices being safe enough to handle high levels of capacity utilization.

The move away from the lows beneath USD 71.00 is a sign of inherent strength for Crude Oil. And it would appear that the next level for resistance should be when the market tests the longer term trend indication using the 50 day moving average, which comes into play at USD 76.90. A break of this resistance level set up for a move towards USD 79.20 in the short to medium term. USD 71.00 remains to be major support.

Much attention has been diverted from the popular gold and oil commodities, with stories developing around a global food shortage. The Russian export ban on wheat over the next year, has put a positive spin to an already bullish market.

The ban on wheat export has increased the ton-mile demand for Panamax dry bulk vessels (mostly used for grains and coal) contributing to the hike in the average daily rate from its recent low below 16000 in mid-July to above 25.000 today. The price is still expected to rise with the fourth quarter futures contract currently trading around 28.000.

Especially corn prices have shot into the air, breaking through key resistance levels at 414.00. From here it appears to have been one-way traffic, whilst the rest of the world appears to be adjusting to where there future purchases will be coming from.