December Natural Gas futures finished slightly higher on Monday after reaching a multi-month low earlier in the session.
Despite Rally, Buyers Still Concerned Over Rising U.S. Production – Crude oil continued to receive support from speculation that the OPEC-led production cut due to expire next March would be extended, although rising exports from Iraq kept a lid on prices. Traders are saying that they expect to see the production cuts extended when OPEC officially meets at its headquarters in Vienna, Austria, on November 30. In other news, traders said that a 900,000 barrel per day export capacity increase from Iraq’s southern ports to 4.6 million bpd, reported on Sunday, had prevented Brent from rising further. The same old story is helping to hold crude oil prices in a range early Tuesday. The market is being supported by a tightening market due to ongoing OPEC-led efforts to cut supplies. Gains are being limited, however, by the prospect of rising U.S. shale output. Also supporting prices is increasing hedge fund buying.
Price Action Being Influenced by Outside Factors – Gold prices finished higher on Monday in reaction to the weaker dollar. Safe haven buying ahead of a series of central bank meetings and U.S. President Trump’s expected announcement of the next Fed Chair also contributed to the gains. The market also remained underpinned by the ongoing unrest in Spain’s Catalonia region. The federal indictment of former Trump campaign manager Paul Manafort also helped support prices. A weaker stock market also drove investors into gold. The major U.S. stock markets were under pressure on Monday as investors pared positions in response to a report that said the House is considering a plan that would gradually lower the U.S. corporate tax rate. Bloomberg reported the plan being discussed by the House would leave the corporate rate at 20 percent by 2022. The gradual plan “has been considered” but is not final, according to the report. In other news, the government said on Monday that U.S. consumer spending recorded its biggest increase in more than eight years in September. The catalyst behind the increase was a jump in spending from households in Texas and Florida that were forced to replace flood-damaged motor vehicles caused by Hurricanes Harvey and Irma.
Bearish Fundamentals, but Oversold Technically – December Natural Gas futures finished slightly higher on Monday after reaching a multi-month low earlier in the session. The price action wasn’t related to any shift in the fundamentals, but most likely to end of the month position-squaring and the rollover from the expiring November futures contract into the December futures contract. According to Reuters, “U.S. natural gas futures jumped on Monday by the most so far this year as the front-month rolled to the higher-priced December contract. Traders, however, noted the December contract ended flat to where it closed on Friday. Front-month gas futures jumped 21.4 cents, or 7.8 percent, to settle at $2.966 per million British thermal units. The front-month closed at $2.752 on Friday, its lowest settle since February 27. Monday’s rise was the biggest daily percentage gain for the front-month since December 2016.” The longer-term fundamentals are bearish, but be prepared for volatility due to end-of-the-month position-squaring and profit-taking due to oversold technical conditions.
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