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Commodities

Cocoa prices record gains amid pending holiday season

Cocoa prices are rising on the bias that demand would pick up especially during festivities.

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Cocoa prices record gains amid pending holiday season

Cocoa prices are up as Chocolate makers increased their buying pressure on the soft commodity on the basis that demand would pick up especially during festivities like Christmas.

New York-traded Cocoa on ICE closed at $2,333 per tonne. However, it’s important to note that the soft commodity lost over 8% in value in October alone, recording its biggest monthly drop for U.S. cocoa futures since March, when the market dropped 18.5% at the height of worldwide lockdowns over the COVID-19.

READ: CBN to sanction exporters who default on export proceed number

That said, Cocoa traders are wary of the recent lockdown modes prevalent in key markets that include Germany and France, and with the world’s largest economy, the United States recording 9 million COVID-19 cases and more than 225,000 deaths, demand for chocolates are expected to soften, as social mobility is curbed.

READ: Nigeria’s export earnings dropped to $13.39 billion in April due to COVID-19 – CBN

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What you should know

Nigeria plays a leading role in the cocoa industry, covering a 6.5% share of the global production of cocoa.

  • Africa’s largest economy, Nigeria is also the fourth largest exporter of cocoa beans globally. It is behind Côte d’Ivoire, Ghana, and Indonesia, according to the National Export Promotion Council.
  • Cocoa exports in Nigeria are projected to grow annually by 4% in the coming years.
  • These export earnings from cocoa, if invested properly, could further help Nigeria reduce its reliance on crude oil, which makes up a large chunk of its export earnings (about 90% Est), and minimize the impact of oil price swings on its economy.

READ: U.S dollar up, U.S GDP expands at record 33.1%

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Price swings were prevalent in last week’s trading session at the Cocoa market, on fears that the ongoing political climate in Ivory Coast, the world’s largest producer of cocoa, might disrupt the flow of supplies – on the bias that the recent election won by Alassane Ouattara, the incumbent leader might trigger more uncertainty as the opposition parties staged a walkout.

READ: Bitcoin whale transfers $105 million worth of crypto, BTC trading at $15,800

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment Trading. Featured Financial Market Analysis for a Fortune Global 500 Company. Member of the Chartered Financial Analyst Society. Follow Olumide on Twitter @tokunboadesina or email [email protected]

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Commodities

Oil prices heading for 5th week of gains, near $50 per barrel

Brent crude futures gained over 1%, as it was within striking distance of hitting the $50/barrel price mark after gaining around 1% on Thursday.

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Crude oil prices slump, as partial lockdowns resume

Crude oil prices are rallying higher at the last trading session of the week, headed for the fifth week of gains.

OPEC+ members agreed to continue limiting crude oil production to cope with the COVID-19-hit demand, but the compromise agreed on wasn’t what oil traders had really hoped for.

  • At the time of writing this article, Brent crude futures gained over 1%, as it was within striking distance of hitting the $50/barrel price mark after gaining around 1% on Thursday.
  • West Texas Intermediate futures were also surging by over 1% trading around $46/barrel.
  • OPEC+, the popular alliance that includes OPEC members, Russia, and other leading oil producers, agreed yesterday to ease deep oil output cuts from January by half a million barrels per day, but still failed to reach a compromise on a broader policy for the rest of 2021.
  • Oil traders had earlier anticipated that the popularly known oil cartel group would roll over oil cuts of 7.7 million barrels per day or about 8% of global oil production, at least until the end of Q1 2021.

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave vital insights on the outcome of the all-important meeting, and the high expectations of significant price volatility at the crude oil market:

“All eyes were on the OPEC+ meeting overnight, where oil ministers ended up meeting at the halfway house and sharing a glass half full in a typical OPEC + fudgy. They came up with the ultimate compromise as the producer’s group agreed to taper production increases.

“They will start with 500k barrels from January and hold monthly meetings to review prices and decide on output policies. These meetings will bring some volatility to the market and, importantly, stand to make hedging harder for US producers.

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“One interesting but not so cohesive front was Saudi Arabia and Russia usually chair the meeting; only Russia did the honours this time. Some see this as a clear sign of the conflicts within the organization.”

What to expect

Looking at the recent price action, Nairametrics is of the opinion that the futuristic price movements of oil prices would largely depend on the degree to which OPEC+ cohesion remains intact.

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Commodities

Oil prices slump, OPEC+ meets today

Brent crude futures prices were down by 0.3%, trading at $48.10/barrel after initially gaining 1.8%.

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OPEC+ 2, Oil production drops, as Nigeria complies with OPEC+ output cuts  

Crude oil prices were trading lower at the fourth trading session of the week, as major oil producers including Saudi Arabia and Russia are set to meet on oil production cuts extension set in place in the first wave of the COVID-19 onslaughts.

READ: Comparing the 2016 oil price crash to 2020 oil price crash

  • At the timing of writing this report, Brent crude futures prices were down by 0.3%, trading at $48.10/barrel after gaining 1.8% yesterday.
  • U.S. based oil contract, West Texas Intermediate futures, traded at $45.11/barrel, having ended 1.6% higher at Wednesday trading session.
  • OPEC+ are resuming talks in discussing policies for next year after earlier talks produced no agreement on how to tackle soft energy demand amid a new COVID-19 wave.
  • Oil traders anticipate that the popularly known oil cartel group will roll over oil cuts of 7.7 million barrels per day or about 8% of global oil production, at least until the end of Q1 2021.
  • But after hopes coming from three promising COVID-19 vaccines set for the market triggered a rally in oil prices at the end of last month, some major oil stakeholders recently questioned if such prevailing cuts are still needed

READ: Crude oil prices rally as investors remain optimistic about oil production cut

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave vital insights on leading fundamentals weighing on oil prices including the expected outcome from the all-important meeting scheduled to hold today,

“I expect oil to be whippy but confined to current ranges, until OPEC+ signals the all-clear for traders to shift oil prices back to recent highs.

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READ: Nigeria’s 5,000 BPD refinery will produce 271 million liters of petrol every year

“Reports were hitting the streets of unnamed OPEC+ delegates saying that progress is being made on talks about production cuts. That, combined with the surprise US inventory draw today, has triggered a move up in oil.

“Discussions will continue in earnest and I think given what is at stake, the base case should be that OPEC+ agrees to an extension of cuts. There are clear tensions within OPEC that may undermine market confidence in the OPEC+ deal from now on.

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“It will be more important than ever for OPEC+ to present a unified front, while waiting for demand to recover when the vaccine becomes widely distributed.”

READ: OPEC crude oil production drops to its lowest in nearly 30 years

READ: Crude oil prices up 12% in barely 4 days, triggered by OPEC+ proposed cuts

What to expect

Any sign that OPEC+ is struggling to reach an agreement could weigh down on oil prices, at least in the near term.

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Commodities

Gold prices drop amid COVID-19 vaccine optimism

Gold futures prices dropped 0.32% at $1,813/ounce, though it’s now trading above the $1,800 mark.

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Gold Up as U.S. hits Record Number of COVID-19 Cases, Gold stands firm above $1,800 over increasing virus fears and weaker dollar , Gold stands firm above $1,800 over increasing virus fears and weaker dollar, Gold prices surge higher, Traders focus on U.S. Federal Reserve

Gold prices drifted lower in Wednesday’s trading session.

The plunge in the precious metal price is coming on growing optimism over U.S. talks for the latest stimulus deal and a COVID-19 vaccine hitting the market very soon saw a retreat from the safe-haven yellow metal.

  • At the time of writing this report, Gold futures prices dropped 0.32% at $1,813/ounce, though it’s now trading above the $1,800 mark after it recorded impressive gains on Tuesday as the U.S dollar retreated, yet gold bulls still face uphill challenges from the COVID-19 vaccine optimism prevailing among global investors.

READ: Nigerian billionaire, Benedict Peters Plans to mine Platinium in Zimbabwe

Global investors are primarily reducing their bullish bias, taking into consideration the most recent testimony from U.S Treasury Secretary, Steve Mnuchin, and US Federal Reserve Chairman, Jerome Powell, on Monday to the Senate Banking Committee.

Though both hinted that the world’s largest economy was on the path to recovery, they emphasized the need for a lifeline.

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READ: U.S dollar set for weekly losses, currency traders buy Euro, British Pound

What you should know

In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, spoke on why the yellow metal could face more selling pressure in the coming weeks, taking into consideration, market sentiments that the future looks bright:

“Gold had been trading well below USD1,800/oz and came close to testing the psychological make or break for ETF concerns USD1,750/oz level. Flashing green lights at the end of the tunnel suggest investors should look through the immediate concerns and focus on the future, which seems incredibly bright and bullish.

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“So, with month-end selling pressure mostly out of the way, it could allow investors to focus on those flashing green sectoral lights at the end of the Covid-19 tunnel.”

READ: Germany’s biggest bank says more people now prefer Bitcoin over gold

What to expect

Although, a weaker U.S dollar effectively threw a lifeline around gold prices yesterday, helping it rally back from two weeks of declines. That said, Gold prices might resume its bearish play amid high hopes on COVID-19 vaccines.

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