Let’s Talk Commodities Oil, Cocoa, Coffee And NATGAS

Oil

• Crude oil has seen a 20% pullback since the United States first announced retaliatory tariffs. WTI oil plunged below $60 per barrel, marking its lowest level since February 2021.
• The U.S. decision to suspend tariffs for 90 days led to a rebound across many global assets, including crude oil.
• Most likely, short positions were being covered, as the number of short bets had significantly increased in recent weeks.
• It is important to note that the tariff suspension does not apply to China, which remains subject to 125% tariffs. This keeps the outlook for oil mixed.
• Goldman Sachs, in an analysis published before the tariff suspension, indicated that a decline toward $40 per barrel could not be ruled out.
• U.S. crude oil inventories rose to the highest level in nine months, although they remain below the five-year average.
• Saudi Arabia is cutting its export prices for May by $2.30 per barrel, marking the largest reduction in two years.
• At the beginning of April, OPEC+ indicated that it plans to increase production in May by as much as 411,000 barrels per day, a figure significantly higher than the previously agreed restoration quota of 138,000 barrels per day.
• OPEC increased production in March, and the expanded cartel plans to continue ramping up production from the start of this month.

Crude oil inventories continue to rise in line with seasonal patterns but remain below the five-year average and last year’s levels.

Source: Bloomberg Finance LP, XTB

WTI oil has climbed back above $60, although at one point it had fallen over 20% since the end of March. Currently, a potential target for further rebound lies near the $65 per barrel zone, while support stands at $58 per barrel.

Source: xStation5

Natural Gas

• Natural gas prices rebounded by about 8% during Wednesday’s session following President Donald Trump’s suspension of retaliatory tariffs.
• However, natural gas remains in the early stages of inventory rebuilding. The pace of storage buildup is much faster than in previous years, which continues to put pressure on still-elevated gas prices.
• Gas inventories remain below the five-year average and last year’s levels, although comparative storage levels have started to recover.
• The key period will be the summer season, when increased demand and exports could complicate the rebuilding of inventories.
• Weather conditions in the U.S. remain mixed; in recent days, we have observed a slight uptick in gas demand and a modest decline in production.

Demand has recently picked up slightly, although it remains relatively low from a heating season perspective.
Production has fallen, but inventory levels are still expected to rebound in the coming weeks.

Source: Bloomberg Finance LP, XTB

Gas inventories are recovering significantly earlier than in previous years, but still remain below the five-year average.

Source: Bloomberg Finance LP, XTB

Warming is evident from the west, but in the key heating region — the central and eastern United States — temperatures are forecasted to remain below seasonal norms.

Source: NOAA

Natural gas prices are currently hovering around a key support area, between the 60-period and 120-period moving averages.
If storage builds continue to grow strongly, a further downward trajectory toward the $3.0–$3.3 USD/MMBTU range cannot be ruled out.

Source: xStation5

Cocoa

• Similar to other commodities, cocoa prices gained on Wednesday in response to the suspension of tariffs, which should not lead to higher cocoa import costs for the U.S.
• Prices rose just ahead of the contract rollover, which amounted to $130. The next September contract is trading more than $300 lower than the July contract, reflecting expectations for the next major harvest season.
• Recent data on cocoa harvests in West Africa are not encouraging. Ivory Coast is expected to produce 400,000 tons of cocoa during the mid-crop season, compared to 440,000 tons last year.
• So far, farmers in Ivory Coast have delivered 1.44 million tons of cocoa to ports, which is 11% higher than a year earlier, although it’s worth noting that back in December, the difference stood at 35%.
• The latest ICCO forecast from late March indicates a surplus of 142,000 tons on the cocoa market for the 2024/2025 season, which would be the first surplus in four years. It should also be noted that this is linked to an expected significant drop in demand.
• Cocoa inventories continue to rise, nearing 2 million bags compared to 1.26 million bags in January.
• The cocoa futures curve has turned significantly more negative compared to a month ago.

This could reflect short-term demand or expectations of higher supply in the future. Nevertheless, supply remains highly uncertain, especially over the next 2–3 months.

Source: Bloomberg Finance LP, XTB

Cocoa inventories have increased by 37% since the start of the year, which is consistent with seasonal patterns. However, if inventories continue to rise into June, it may suggest that the harvest season turned out better than expected or that demand has been destroyed.

Source: Bloomberg Finance LP, XTB

Cocoa inventories have risen sharply, although historically they remain at extremely low levels. Therefore, further production issues could still trigger a price rebound.

Source: Bloomberg Finance LP, XTB

A major problem in the market is currently the extremely low demand, reaching levels last seen in 2018.

Source: Bloomberg Finance LP, XTB

Coffee

• The extreme tariffs on coffee-exporting countries to the U.S. have been suspended, which is a positive factor for coffee, which had recently collapsed.
• Prices earlier dropped to their lowest level since January this year, erasing half of the rally that took place from November to early February.
• Since February, coffee has remained under pressure due to easing concerns about this year’s harvest in Brazil.
• The end of El Niño has reduced the risk of drought this year.
• Despite lowered expectations for production issues, inventories are still expected to decline this year to the lowest levels in decades.

End-of-season inventories are projected to be at their lowest in decades, with the stocks-to-consumption ratio expected to fall to just 10%.

Source: Bloomberg Finance LP, XTB

ICE warehouse inventories have recently started to decline significantly. Inventories are at their lowest level in one and a half months and historically remain at extremely low levels.

Source: Bloomberg Finance LP, XTB

The decline in coffee prices ultimately stopped at the 50.0 retracement of the last upward wave. A return above 370 cents would likely signal that the market is once again trading based on fundamental factors, beyond the impact of Donald Trump’s tariffs.

Source: xStation5

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