Running Out of Gas!
Natural Gas futures soared to 6-week highs early in the session as storm activity in the Atlantic basin sparked a round of short-covering buying. Two tropical disturbances are being tracked by forecasters at the National Hurricane Center in Miami – one off the coast of Africa about 520 miles west-southwest of the Cape Verde Islands and another over the northwest Caribbean. Though neither storm has been upgraded to Tropical Storm status, traders will be watching developments carefully should these systems organize into stronger storms. In addition, cooling demand for the Midwest and East coast should remain strong as forecasters call for temperatures in the mid 80’s to low 90’s this week. Today’s rally sent prices above the 50-day moving average at $6.977 and through psychological resistance at $7.000, which triggered fresh momentum-based buying. Cash prices have moved higher with Henry Hub next day delivery up 60 cents this morning. However, bulls ran out of gas around midday, as one weather model predicted the depression near the Cape Verde Islands would move north away from the U.S. Gulf Coast, sending traders scrambling to sell out of existing long positions and knocking prices well off the session highs to end the day. The 100-day moving average at $7.526 looks to be the next resistance point for September Natural Gas, with support now seen at $6.684. September Natural Gas closed at $6.794, down 0.026.
After hitting 3-month lows on Friday, Cocoa futures rebounded to start the week, with trade and technical buying noted this morning. A return to some stability in the stock and commodity markets this morning has helped support Cocoa futures, along with higher prices in London. Origin selling has been light of late, especially once prices fell below the $2,000 per ton level. Technical traders will note that the 14-day RSI had fallen into oversold territory on Friday with a reading of 27.91, which may have contributed to some of the fresh buying seen today. Support for December Cocoa is seen at Friday’s lows of $1823, with resistance at $1923. December Cocoa closed at $1886, up $36.
Mike Zarembski, Senior Commodity Analyst
