European Commodity Winners Last Week
Cocoa #7 (CAH25), +22.19%
Ghana and Nigeria are reporting bad weather, which will likely affect the next crop. This sent prices to a four-month high last week.
The Coffee and Cocoa Council has reduced its sales of cocoa export contracts for the 2024/25 season by 40% according to Reuters. However, the forward curve is pointing sharply downward for 2025, which indicates the current upsurge may not be for the long run.
Technically, the successive 5-day ascent of green candles depicts an impressive bullish run. Current prices are well above the 10, 20, and 50-unit exponential moving averages (EMAs). With the 14-day Relative Strength Index (RSI) marking 83.93 (overbought area), there is a high probability of a pullback. Long traders should take extra caution at these levels.
UK Natural Gas (NFZ24), +9.37%
Overall, total gas demand in Great Britain is forecast to be about 39 billion cubic meters (Bcm), which is similar to the weather-corrected demand of the winter 2023/2024 period. The demand for gas in power generation is forecast to drop by 5%, largely due to the continued rise of renewable energy sources in the UK's electricity mix.
In contrast, gas prices traded near an 11-month high in Europe (Dutch TTF Benchmark) as there are supply concerns as Russia announced the suspension of gas to Austria.
UK gas prices are trading above the 10,20 and 50 EMA in a very bullish move for the last 8 days. Long traders had so far the advantage, but there are 2 signals to worry about: 1) The daily 14-RSI currently at 68 is fast approaching the 70 overbought area; and 2) the last session made a "doji" candle pattern that might signal a pause or end to this trend.
European Commodity Losers Last Week
Tin Refined 3M (Cash) (Q2Y00), -9.18%
The tin market in 2024 is characterized by a short-term surplus, driven by sluggish demand recovery, especially from traditional sectors like semiconductors. Green technologies like solar panels and electric vehicles (EVs) will increase demand for the metal in the long term. This is reflected in the forward curve, which is very bullish for 2025.
LME inventories are reporting 4,919 t as of Nov. 15, which is an average level. LME fund net positions are at 2,070 contracts (as of Nov. 1), which is above average and shows strength in the direction.
Myanmar Wa State reported availability for Chinese smelters at low levels. Having said that, the $1.4 trillion stimulus package in China has not impressed the markets so far. Both opposing factors will determine the price direction in the next weeks.
Tin is trading below the 10, 20, and 50-day EMAs, marking the bearish mood, with the last 6 sessions in red candles. The RSI at 27.89 is in oversold area, and added to that, the area around 28,500 was a major turning point on July 30. So, this could be an interesting point for short traders to take profits, and for long traders to consider entries.
Nickel 3M (Cash) (P8Y00), -5.23%
Nickel demand, particularly for batteries in EVs, is rising rapidly as EV manufacturers favor nickel-rich chemistries for their high energy density. Nickel demand from the EV sector is expected to quadruple by 2030. Currently, the steel sector is the main consumer.
While nickel was one of the worst-performing metals in 2023 due to oversupply, the potential for future shortages tied to the EV boom is likely to create upward price pressure.
LME reported 154,434 t in stocks (as of Nov. 15), which continues to improve from the lows of May 2023, and this improved stock is stopping any fast price increase. LME also reported -7,634 net positions, which is statistically low, and gives little support to the current direction.
The metal is trading well below the 10, 20, and 50 EMAs, marking a clear downtrend. It has also broken the previous key support at 15,500 for 2 sessions.
This can now be used as a key resistance, and short traders have the upper hand so long as this new resistance is not crossed.
- European Commodities: Bulls Should Be Cautious as Cocoa Keeps Surprising the Market
- Is the Cocoa Rally Over?
- European Commodities: Cocoa Reaches the Key Level of 5,500
- Will Sugar Join the Roaring Softs?
