Commodity Research Report Ways2Capital 12 june 2017

SPDR Gold Trust GLD, the world's largest gold-backed exchange traded fund, said its holdings stood at 867 tonnes, remain unchanged from previous business day. Holdings of the largest silver backed exchange-traded-fund (ETF), New York's iShares Silver Trust SLV, stood at 10562.91 tonnes, remain unchanged from previous business day

SPDR Gold Trust GLD, the world's largest gold-backed exchange traded fund, said its holdings stood at 867 tonnes, remain unchanged from previous business day. Holdings of the largest silver backed exchange-traded-fund (ETF), New York's iShares Silver Trust SLV, stood at 10562.91 tonnes, remain unchanged from previous business day

Precious metals prices was little changed ahead of a U.S. Federal Reserve policy meeting on Tuesday and Wednesday, with analysts saying the U.S. central bank could take an aggressively hawkish posture of signaling a balance sheet reduction later this year and another interest rate increase in December.

French bank Natixis has sued metals broker Marex Spectron for $32 million over alleged fraudulent receipts for nickel stored at warehouses in Asia run by a unit of commodities giant Glencore, a court filing showed. Disruptions at the two biggest copper mines early this year may have only a muted impact on prices after a surge of scrap metal partially filled the supply gap and a recovery in mine output is due to help in the second half.

U.S. shale oil production is expected to rise for a seventh consecutive month in July, according to a forecast Monday from the U.S. Energy Information Administration, as analysts continue to raise concerns about oversupply given a resilient U.S. shale industry. July production is forecast to grow by 127,000 barrels per day to a record 5.48 million bpd, according to the EIA's monthly drilling productivity report. That would mark the biggest monthly rise since February and the highest production level since recordkeeping began in 2007

Gold prices fell about 1 percent on Friday as the dollar strengthened while palladium leapt more than 7 percent as a surge in speculative demand forced industrial users to close out short positions, traders said. The backwardation in the market - a formation in the forward curve in which the price of metal for future delivery is below the spot price - can suggest a near-term shortage of metal. It recently steepened, prompting a wave of buying. Traders reported a reluctance to lend the metal, suggesting tightness in near-term supply. However, chart patterns indicate that the metal is vulnerable to a sell-off from these elevated levels, technical analysts said. Gold fell for a third day, meanwhile, after British elections failed to deliver a clear majority for Prime Minister Theresa May, knocking the pound sharply lower and helping lift the dollar index to its highest since late May.

The US government posted a USD 88 billion budget deficit in May, compared to a USD 52.5 billion gap a year earlier and slightly above market expectations of a USD 86.5 billion shortfall. Producer prices in Japan rose 2.1 percent year-on-year in May 2017, the same as in the prior month but slightly below consensus of 2.2 percent. The producer inflation index remained at its highest level since November 2014 The non-commercial futures contracts of Comex gold futures, traded by large speculators and hedge funds, totaled a net position of 204,465 contracts in the data reported through June 6th. This was a weekly rise of 37,375 contracts from the previous week which had a total of 167,090 net contracts. The strong gains (+77,741 contracts total) of the past three weeks has put the overall net position above the +200,000 level for the first time since April 25th when net positions totaled 200,677 contracts. The non-commercial futures contracts of Comex silver futures, traded by large speculators and hedge funds, totaled a net position of 65,941 contracts in the data reported through June 6th. This was a weekly rise of 4,527 contracts from the previous week which had a total of 61,414 net contracts. Speculator positions, having risen by over 22,937 contracts in the past three weeks, are now at the highest net position since May 2nd when net positions totaled +71,367 contracts.

Oil prices saw a sell off for a third straight week as physical markets remain oversupplied amid resumption in Libyan and Nigerian oil output. US oil production continues to edge up and is likely to surpass its peak later this year as oil rigs are back near April 2015 levels. The tensions in the Middle East over the relations between Qatar and GCC members and the pickup in Chinese oil imports have failed to provide any support to prices. On the whole, we believe that rising US output will continue to cap prices this year but the OPEC deal, for now, has ensured that WTI prices probably won’t fall below $45. Natural gas remains weak on a seasonal basis and more downside cannot be ruled out. Non-OPEC supply forecasts also continue to be revised upwards. The OPEC now sees Non-OPEC supply growth of 0.95 mbpd in 2017 vs. previous forecast of 0.58 mbpd. The revisions have been largely prompted due the fast rebounding shale oil production in the US. Oil rig count has been increasing since June 2016 and is now at its highest since April 2015. At 741 rigs, US oil rigs have more than doubled from the same time last year. EIA forecasts show that US shale oil production is expected to rise further in June. The EIA drilling productivity report showed that shale oil output will likely increase by 122,000 bpd in June to 5.40 mbpd. To put this in perspective, in the downturn of 2015-2016, shale oil output fell from a peak of 5.46 million bpd in March 2015 to a low of 4.75 million bpd in December 2016. Since January 2017, shale production has started to edge up and is now almost back near its peak. Weekly data from EIA shows that total US oil production is comfortably above 9.3 million bpd, the highest since August 2015. The EIA forecasts output to reach a new record and surpass 10.0 mbpd next year. This is going to remain the biggest headwind for oil prices

To offer a backdrop, The OPEC in its May meeting decided to extend output cuts until March 2018. This means OPEC and Non-OPEC combined production will continue to be cut by 1.8 mbpd for another 9 months. The OPEC believes that deal will bring inventories back in line with upper range of five-year averages. The fact that disappointed markets was that no new non-OPEC countries will be joining the pact and there was no option set out to continue curbs after March 2018. Compliance to the deal will also be in strain as the output cut period is much longer this time. The OPEC in its November meeting will take a call on the strategy based on market conditions WTI prices have seen an extended sell off in the past few weeks despite the OPEC agreement as there are still no visible signs of tightness in the market. The re-balancing process remains slow and resumption in Nigerian and Libyan output has complicated the OPEC strategy. Nigerian production is back at a 16 month high of 2.2 mbpd after Royal Dutch Shell lifted force majeure on Forcados crude Meanwhile, US oil inventories also surprisingly increased last week by 3.3 million barrels along with a build in both gasoline and distillate stocks by 3.3 and 4.4 million barrels resp. Gasoline and distillate demand also fell last week. The drop in gasoline demand during the driving season was particularly surprising and if demand fails to pick up we could be in for more weakness in oil prices. On the whole, US oil and product inventories still remain elevated and we are yet to see a sustained draw down. In Europe, total product stocks at the ARA hub are down by about 15% y/y.
For natural gas, prices fell as inventory injections in most regions topped the five year average for this week. Net injections into storage totaled 106 Bcf, compared with the five-year average net injection of 94 Bcf and last year's net injections of 68 Bcf during the same week. Weekly net injections surpassed 100 Bcf mark for the first time in two years. Working natural gas stocks are 2,631 Bcf, which is 11% less than the year-ago level and 10% more than the five-year average. The weather outlook in the coming weak implies moderate demand and hence we are unlikely to see any major bounce back in prices

Base metals traded with a mixed bias last week, with copper trading firm, helped by concerns over supply from Chile, recent data pointing to robust import demand in China and falling stocks of the metal. Other metals have been sideways and trading in a range lacking directional clarity. Major event last week was British PM election where voters gave PM May a devastating blow in a snap election, wiping out her parliamentary majority and throwing the country into political turmoil.Copper prices were supported by recent supply concerns and a positive import data pointing to robust import demand. A fall in inventories both on the LME and the ShFE also helped support prices. Copper stocks in LME warehouses continue their retreat from early May´s seven-month high. They have declined almost 20% from that peak. Copper ore and concentrate imports, which are processed in China, stood at 1.15 million metric tons in May. Imports have fallen on a yearly and monthly basis. In May, imports were at the lowest level since October 2015. China imported 390,000 metric tons of unwrought copper in May—down 9% YoY, however, imports rose 30% compared to April. Positive trade data registered another surplus in May, it's helped coax copper prices higher. Positive data indicated that the country's economy is holding up better than expected despite rising lending rates and a cooling property market.

Refined copper imports tend to increase when there is limited availability of concentrate, so the decrease in concentrate supply could be the result of a lingering effect from the strike in Chile and supply disruptions at Freeport in Indonesia. The market will grab any good news it can get, but the overall picture here is that we are looking at a softer Chinese economy, and in general a global economy that will not push ahead with the pace we saw in the first quarter. Copper speculators have now pushed their bullish bets higher for three out of the past four weeks. Positions had been on a consistent downtrend in recent months and bullish positions had fallen to the lowest level of the year on May 9th at 8,081 net contracts. Codelco has restarted operations at mines in the northern part of the country after a rain storm caused a series of precautionary closures. British PM election where voters gave PM May a devastating blow in a snap election, wiping out her parliamentary majority and throwing the country into political turmoil. Sterling spiraled lower as British elections left no single party with a clear claim to power, sideswiping investors who had already weathered major risk events in the US and Europe. The shock UK election result added to political risks surrounding the upcoming Brexit negotiations, due to start on June 19, sending sterling tumbling. This, along with a drop in the euro, pushed the dollar higher making it less expensive for commodities. James Comey accused President Donald Trump of firing him in a bid to undermine a probe into Russia’s alleged involvement in the U.S. presidential election, but did not say whether he thought the president attempted to obstruct justice. In other metals, LME aluminium traded weak, to clock its worst week since mid-April, as traders brushed aside news that Qatar's exports of the metal had been blocked and focused instead on weak Chinese demand and rising geopolitical tensions. Miner Alcoa said it had restarted half the capacity at its 300,000 tons per year Portland smelter in Australia crippled by a blackout half a year ago. Global nickel miners are coming under renewed pressure to cut costs or close capacity as a flood of cheap ore pushes prices to 1 year low, while the current fundamentals show little prospect of recovery.

Last week, gold prices opened at 29204 and soar till the high of 29585. However, in the later half, prices turned lower and finally ended almost near the week’s low of 29019. Prices have exactly tested the slating trend line resistance and turned lower to end forming shooting star candlestick formation. On the other hand, prices have ended just above the trend line supports. Going ahead, a convincing break below 28900 will turn the short term outlook to bearish. According to the retracement, supports are seen at 28750 then 28580 levels whereas on the higher side the resistances are seen at 29250 then 29550. For the week, break down below 28900 will drag the prices till the immediate supports of 28750 levels.

Summarizing this month’s USDA report, that was released on June 9th, Global oilseed production is forecast higher this month at 573.0 million tons. A larger cottonseed forecast in Pakistan and China, as well as higher sunflower seed output projected for Ukraine, more than offset reductions in EU rapeseed. Global soybean production is unchanged this month. Soybean imports are estimated lower in this month’s USDA report, as ample carry-in stocks in Brazil reduce the need for imports from Paraguay. Global exports are reduced on lowered projections for Argentina. Global soybean stocks are lifted this month with increases in Argentina and Brazil. ? Likewise, the U.S. season-average farm price for soybeans is unchanged at $9.30 per bushel. The World Agricultural Supply and Demand Estimates (WASDE) report from the Department of Agriculture had made few changes like raising forecasts for soybean inventories. While looking at balance sheets versus last month, we do see some useful revisions such as projection for Brazil soybean production, raising its outlook to 114 million metric tons from just over 111 million tons last month. Argentina’s soybean output is now pegged at 57.8 million tons, up from 57 million tons last month. Soybean currently displays some strength because of positive cues from global wheat markets which is prompting the Fund houses to expect some gains in soybean on this fact. Since wheat and soybean find use in animal feed rations, a bullish impact in near future will be translated in soybean as well. However as stated earlier, chances of long lasting uptrend are quite low because of satisfactory report, talks of sufficient amount of inventory lying with stockists and reports of timely onset of monsoons, beneficial for sowing of soybean. Good number of deliveries will be in the market after the June expiry, which shall also limit the gains in this commodity. ? Farmers' strikes in India's top soybean-producing state of Madhya Pradesh over the last two weeks have created uncertainties about supply, causing volatility in prices and helped futures in recovering from lower levels. The strike can continue for some more time hence further gains expected in short term.
Refined soy oil futures closed higher tracking good demand in the spot market. Moreover, increase in base import prices also support domestic prices. Government has not taken any decision on edible oil duty hike while strong Rupees pressurize the prices. Government increases the tariff value for crude soyoil for the first half of May by $18 to $811 per tonne. This is second increase in base import price in a month. As per SEA, the stock of edible oils as on 1st May, 2017 increased to 21.2 lt from 19.1 lt in Apr., 2017 while Import of soy oils during April 2017 is reported at 3.04 lt compared to 3.50 lt in April 2016 - down by 12.4% however, the imports increase 32% m-o-m.

MCX cotton closed lower on Monday on anticipation of good sowing progress. As per latest data from Agricultural Ministry, cotton is planted in 14.1 lakh hectares (l ha) till last week, higher by 43% compared to last year acreage of 9.87 l ha for same period. In Haryana, acreage was at 630,000 ha, up 28% on year, while in Punjab, the area under cotton was up 52% at 382,000 ha, the data showed. As per ICAC, Cotton area in India is forecast to expand by 7% to 11.3 million hectares, and production could increase by 3% to 6 mt in 2017/18. ICE futures were mostly unchanged on Monday, holding near two-week lows hit on Friday amid a weaker dollar. Moreover, lower U.S. export outlook for the new crop, weighed on the prices. Net upland sales for the 2016-17 crop last week totaled 82,700 running bales, down 26 percent from the previous week, weekly export sales data from the USDA showed. However, US sowing data showed 92% of cotton crops were planted in the US by the week ended June 12, up from 80% in the previous week. USDA June report draw a bearish trend (from 14 million to 13.5 million bales) for the US cotton exports while ending stocks at 9 year high at 5.5 million bales.
time the new season arrival pressure shall decrease gradually. This will check the downside this week. The current level of inventory of domestic mustard seems to be sufficient to balance the day-to-day requirements. Also, forecast of Oilseed production at record levels shall be another aspect in reducing chances of any long lasting rally as of now. IMD’s report of a normal monsoon and ongoing supply season had put pressure on prices till first few days of May. Sowing has been above last year too, thereby creating bearish trend in last few months. The arrival pressure will drop further in coming weeks thereby supporting the market in near term. However, with new season arrivals to drop only after mid Indian rapeseed futures finished higher ahead of deliveries, as the futures contract contracts were aligned in the direction of spot market prices. But under given scenario bearish tone across the entire oilseed basket and prospects of rains along with sufficient quantity of stocks with traders and stockists shall limit the upside movement in coming weeks. Overall, moderate upside can not be ruled out as prices have turned cheap enough to induce fresh buying in spot markets. Reports of ample stocks lying against weak demand and talks of a higher production this season keeps the upside movement in check since last few weeks. Presently the prices are quite cheaper and at the same -June, buying interest will be lower for next few weeks. Therefore futures might not recover much from current levels in coming weeks. The downside movement was capped on Friday as most mandis of Rajasthan were closed owing to local strike. The Government’s Final Sowing report for mustard, released in recent months had showed a likely increase of roughly 9 percent in production against last year. On the other hand third advanced production estimate released last week had showed that production of mustard is expected to be nearly 8 MT i.e. little above 1.2 MT than last year. These will be another set of bearish drivers in medium term.

Jeera Jun futures fall on Monday mostly due to profit booking at higher levels. There is steady physical demand and good exports while the stocks in the Exchange warehouse is diminishing. The jeera arrival in May is lower this year compared to last year. As per Agmarknet data, about 10,688 tonnes of jeera arrived in May 2017 compared to 14,302 May last year. On the export front, country the exports increase by 26% to 1.24 lt in 2016/17 as per the data release by Dept of commerce, GOI. The stock levels in the NCDEX warehouse are dropping since last 15 days. It now 1,171 tonnes as on Jun 11, fall from 1,245 tonnes last week. Last year, stocks were higher at 3,478 tonnes. NCDEX Turmeric closes with gain on Monday; its third gains in three sessions as the physical demand is rising and market arrivals are diminishing. However, the trend seems to be little sideways on reports of good rains in turmeric growing areas. There was lower demand all season from upcountry and industrial buyers. Turmeric arrivals in the country are higher in the month of May. As per Agmarknet data, about 6,378 tonnes arrived last week compared to 11,942 tonnes during previous week. On the export front, country exported about 1.11 lakh tonnes in 2016/17 up by 30% compared to last year exports of 85,412 tonnes, as per government data.


After witnessing the continuous fall for the last few months, Turmeric prices have come down till 5300 levels. However in last week pullback from lower levels was seen and price closed around 5520. On the technical chart, prices have almost tumbled till the long term trend line supports of 5150 levels. The prices rebounding almost from the supports followed by volume is indicating further up move till the trend line resistance of 5900 levels in the coming sessions. The momentum indicator RSI hovering within the oversold zone and is indicating re-bounce in prices.

For the eight consecutive weeks, Guar seed prices traded on lower note and in the last week it dipped till the low of 3235 but recovered slightly and finally ended at 3298. Prices are moving towards the trend line supports of 3200 mark. In this week we could see prices testing the supports and rebounding from the same till the immediate resistance of 3350 then 3450 level whereas breach below 3150 will once again turn the commodity to bearish. Momentum indicator RSI has slipped into the oversold zone and can see some pullback whereas MACD is still on the negative note.

After retesting the trend line supports in the prior week, soy oil prices rebounded after opening at 619 and ended almost near the week’s highest level 633.10. Soy oil prices are reverting back from the supports and ahead the immediate resistance is at 642, surpass above that will shift the primary trend to bullish and edge the prices till 664 levels. While on the lower side the immediate supports are at 613 then 608. The momentum indicator RSI sharply edged higher and MACD is moving towards the positive crossover indicating bullish signs.

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