Natural gas prices surged higher on Tuesday along with nearly every other commodity class as investors continue to pour money into the markets regardless of the underlying fundamentals.
The crude oil market overcame a very bearish outcome to a weekend production meeting which was expected to produce the first production freeze agreement between OPEC and non-OPEC producing countries in 15 years. But even as the meeting failed to reach an agreement as expected, crude oil was able to rally back from early 5-6% losses on Monday to close the day higher. Gains were extended into today's session.
Investors have also been actively buying into the grain markets which in some cases had reached new 2016 price lows just a few weeks ago.
Improving sentiment regarding commodities has also aided the natural gas market which has been trending higher for the past 6 weeks from a new 18-year price low reached in early March.
Changing weather forecasts and a small drop in U.S. production have also helped natural gas prices which today reached a 2-month spot price high.
The rally higher may continue near term which could be a good opportunity to layer in a bearish position either using futures or options to take advantage of the expected end of summer sell off.
The seasonal price trend for natural gas over the past 3 and 5 years points toward a final price low later this year, and record high storage will also be a negative factor.
It will be interesting to see how high the current rally can take prices. The funds were long just over 100,000 contracts according to last week's Commitment of Trader's report and have likely added to existing positions in this week's trade. An updated COT report is to be released on Friday.
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