In recent months, five of OPEC’s largest oil exporters: Saudi Arabia, Iran, Iraq, Nigeria and Libya have all raised or been trying to raise out while at the same time talking with the others about a potential production freeze.
A short-squeeze on Tuesday drove November natural gas futures sharply higher. The move was expected because the number of short-positions was dropping dramatically as the market approached a series of old tops at $3.060, $3.065 and $3.067. This move was even stronger as I expected as it even took out the July 29 top at $3.091, putting it in a position to challenge the July 1 top at $3.148.
Prices could continue to rise on Wednesday because the market is being supported by a rapidly declining gas glut. The over-supply situation is being reduced at a faster pace than oil’s following a hotter-than-average summer in much of the U.S.
Hedge funds held the largest bet on rising prices in two years, as less gas has been placed into storage ahead of the winter months.
The price action suggests that this rally should continue over the near-term. And it isn’t all about technical factors. From the fundamental side of the equation, traders are expecting that injections over the course of the next few weeks will be weaker than in previous years. This is encouraging because it may mean that producers have scaled back production due to the historically low prices.
BASE METALS: Future of 2017
Metal prices bottomed out earlier this year and ever since we are seeing rising prices. However, was that the ultimate bottom after a five years of a bear market? Are metal prices set to continue running higher in 2017?We see 4 critical factors to watch as we move in 2017. These factors will determine the sustainability of this year’s bull market:
1. Supply Cuts
Some production capacity was closed this year to fight low prices and the market now seems more balanced than last year. These supply cuts helped push metal prices higher, but the problem is producers might now have enough incentives to restart production. A good example is the zinc market. Zinc prices rose sharply this year thanks to supply cuts, but now markets wonder if Glencore and China’s zinc miners will start upping their production to reap the rewards of higher prices.
2. Chinese Stimulus Measures
China unleashed a renewed government stimulus in the form of credit expansion and infrastructure building in December, which has — at least momentarily — improved the demand side of the equation for commodities and particularly for industrial metals.
3. China stock market rising this year
China’s stock market rallied to its highest levels in almost a year, signaling that investors are more optimistic about China’s growth prospects. Some might argue that this rally is just fueled by government intervention and, therefore, it’s just speculative. Whether this is just speculation or not, a new round of stimulus measures would be bullish for metal prices in 2017.
4. The US Dollar
Base metals as commodities move in the opposite direction of the dollar. In the spring of 2011, the U.S. dollar started a new bull market, which coincided with the peak of commodity prices. Ever since, the dollar has trended up and commodities down. However, this year, the dollar weakened contributing to higher metal prices.
The Federal Reserve showed intentions at the end of last year to raise interest rates four times in 2016 but Fed officials have left interest rates unchanged so far this year. This had a depressing effect on the dollar. However, it is possible for the dollar to rise in 2017, as the Fed seems more willing, now, to hike rates. Higher interest rates would boost the dollar as it makes the currency more attractive to yield-seeking investors.
China Aluminum International Trading Co. (Chalco Trading) hiked aluminum prices it offered in major markets today after big cut in previous day, it said on its WeChat.
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