The UK Natural Gas May 24 (NFK24) contract is set to be the best performer in Europe commodities markets so far this week, with a 16.29% 5-day increase. It is currently trading at 73.69 pence/therm.
After the low of 54.84 on 23 February, it had a solid recovery. However, at present it is facing a key resistance at 74.9.
On the fundamental side, the latest attacks on Ukrainian energy facilities, particularly underground gas storage by Russia, might damage its gas supply operations very soon. Added to that, the current conflict in the Middle East is affecting all energy sectors with worries about reductions in future supplies.
On the demand side, Japan liquefied natural gas (LNG) buyers are increasing purchases significantly to replenish their inventories. Last March was unusually cold in the region, with above average demand for gas powered electricity. They are also storing gas in anticipation for the peak season this summer.
From the technical side, the contract is still locked in a sideways range with a low at 61.5 and a top in the area around 74.5-74.9. This top is a key level resistance, active since 31 January 2023, that must be broken to the upside to encourage long positions. Expect profit taking at the current price as the market is already approaching it.
The last market prices are well above the 10, 20, and even 50 daily EMAs which is encouraging for bulls, however we cannot confirm a solid uptrend until the we see a closing above 74.9.
Positive performers this week in Europe:
Tin Refined 3M Cash (Q2Y00) +12.72%
From the low of 22,900 marked on 27 November 2023, the price action has been on an impressive uptrend. In the last 7 sessions, it is even accelerating into an upward parabolic move.
These levels were only seen back in January 2023. This industrial metal trades in the London Metal Exchange (LME), which is reporting drops in its tin inventory. It is trading at 32,007 USD/metric ton and is up 27% this year.
There is further momentum in this market supported by supply chain issues, particularly in Indonesia (top exporter) plus conflicts in Congo. The International Tin Association expects delays in mineral shipments from that country.
Added to the above, in Myanmar's Man Maw tin mine (third largest producer) there is suspension of mining activities ordered by the autonomous authority Wa State Army.
On the demand side, funds have now record long positions with over 3100 contracts according to the LME Commitments of Traders Report.
The volatility has also rocketed, which makes it already a difficult market to trade, loaded with significant speculative positions. Any improvement in the current dramatic supply change issues might turn the tide sharply in favor of short positions. For now, the trend is your friend…
VSTOXX Futures Apr '24 (DVJ24) +13.03%
Following its peers in other major indices, this European volatility index is recovering from lows not seen since January 2020. This is attracting long positions in this unusually low volatility levels.
There seems to be some overconfidence in the European equity markets about the ECB lowering interest rates. That has not happened in its recent last meeting, and it remains at 4.5%. Statistically, the VSTOXX approaching the area of 12-13 has produced sharp rebounds.
Its recent low of 13.10 on March 11 did just that, and on a daily basis prices have broken all 10,20 and 50 EMAs. Action to the upside very likely if next sessions' news will not boost equities, especially from inflation releases and the ECB.
Cocoa #7 Jul '24 (CAN24) + 11.29%
Cocoa has been the best performer this year so far as a result of the severe supply issues from Ivory Coast and Ghana, which concentrate most export markets for this soft commodity.
It keeps hitting all-time highs as Ghana Cocoa traders are postponing deliveries. Also the fall in the British pound supports London cocoa prices generally.
There is a global deficit for 2023/2024 in Cocoa, and although demand from confectioners is falling, it remains very inelastic meaning it is not falling in proportion to price increases.
These facts were in the news already months ago. The latest actions of Ivory Coast and Ghana governments to stop the hoarding of beans by farmers to ease the supply could provide an opportunity to short traders at the current record price levels.
Milling Wheat May '24 (MLK24) +0.5%
Although not in the “top” list, this contract deserves attention. Milling Wheat prices seem to have hit a bottom at 188 on 3 April.
Daily prices are now trading above the 10, 20 and are about to break the 50 EMA. This setup looks attractive to start long positions. The impressive fall initiated on 17 May 2022, when it was at trading at 437, seems to have stabilized.
This contract is one of the few in the European group offering some volume in its options market, so check for the implied volatility and the available options as an alternative to trade it.
Negative performers this week in Europe:
White Sugar #5 Aug '24 (SWQ24) -4.5%
This contract trading on the ICE/EU exchange is technically in a bearish situation. Trading below all the main 10,20 and 50 EMAs. At current price of 596 the market is approaching a strong support in the area 585-590.
Attention short traders as breaking down this level opens 550 as the new target.
Brazil outstanding exports year over year is up 25% and sugar cane production also is showing improved numbers from last year. For now, Brazil fundamentals have been playing in favor of the bears…
Heating Oil Jun '24 (LOM24) -2.25%
Price action is in a clear upward channel initiated on January 08 2024 from a low of 2.28. The daily prices are above all the main averages but not on the weekly bars. Given the Middle East conflicts, attacks in Russian refinery facilities, and latest prediction of robust summer oil demand by OPEC traders are rather bullish so far. The last pivot for those going long was at 3.41. Long traders should be prepared for some profit taking in that area.
On the date of publication, Cesar Marconetti did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
