Cesar Marconetti - Barchart - Mon Jun 24, 6:54AM CDT
RBOB Unleaded Gasoline Blendstock (LGU24)rose +4.3% last week and has been locked in a range with upper bound at 2.8 and lower bound at 2.05 since September 2022.
Gasoline had a massive rally from February 2022 with the invasion of Ukraine, topping at 4.31 in June 2022, but from September 2022 it has not defined any trend.
As we are entering the summer peak season we might see a boost in demand for gasoline. The contract is highly correlated with crude prices, and crude has been steady so far this year despite the Middle East tensions and war in Ukraine.
The weekly bars are now testing the intersection of the 10, 20, and 50 unit exponential moving averages (EMAs), and ifbroken to the upside, it will very likely be heading toward the 2.80 upper limit, giving an interesting opportunity to long traders.
To the benefit of swing traders, the contract has been remarkably technical in the last two years, respecting support and resistance levels as well as some indicators such as the weekly Relative Strength Index (RSI) andthe historical volatility (HV).
The weekly historical volatility of this contract does not stay below 30 for long periods, so at the current low level of 22.77, it may soon get back to wilder price moves.
On the weekly RSI, values in the range of 30-35 have provided mostly good long entry points, whereas prices in the 55-60 range gave opportunities for short positions.This might hold if the sideways range trading continues through 2024.
Top European Commodity Performers
Zinc Special Hg Cash (Q3Y00) +2.63%
The futures curve is in contango until June 2025, peaking at 2,900, so the market is not expecting any supply or demand shock in the next months.
There are reports of reduced demand from China, with imports decreasing by 34% so far this year (compared to previous year). On the supply side, Swedish miner Boliden said it is suspending
production at Europe´s largest zinc mine in Ireland.
Zinc finally broke a key resistance at 2,650 in April but it could not last much above the key level of 3,000. Now the 20 EMA provides an effective support, and so far, the technicals are still bullish.
Lead PIG (R0M25) +1.97%
LME lead stocks at 225,275 tn are back to a normal level, as it was coming from record lows in 2023. LME Lead Futures funds net positions at 2,183 are net long.
The forward curve is sharply in contango, pointing to higher lead prices in the future months.
As a member of the base metals group, lead is sensitive to the Fed's interest rate decisions. As only one Fed cut is expected now in 2024, this has put a limit to any bullish trend.
Since November 2022 prices are in a sideways channel with the top at 2,300 and the bottom at 2,000. So far, it looks like the channel will hold for 2024.
Worst European Commodity Performers
Cocoa #7 (CAU24) -9.06%
There is uncertainty about the 2024/25 crop output, and short term, the deficit remains. Estimations for the next crop will come by September 2024.
The forward curve is in sharp backwardation, withcontracts quoting 5,300 at the start of 2025.
The next resistance is 9,000 for this uptrend started in May to continue. The last week´s low at 7,144 so far has beenrespected, and is holding well above the key 10 weekly EMA. This average indicator has been an effective dynamic support throughout the explosive bullish development of the last months.
Breaking it down will signal a stop for the current trend.
Natural gas is attempting a timid uptrend from the lows around 55 back in February 2022, but is not convincing anyone.
Norway has repaired its pipelines to the UK Easington Terminal,and is now Europe´s top gas supplier after the Russian invasion of Ukraine. Inventories both in the UK and Europe are at good levels
to cover the demand in the next months. So the price direction will be driven mainly by any issues with the Norway supply for now.
The rise is slow for an energy contract and with the current weeklyhistorical volatility at just 46 (the average is 80) will hardly last.
This could be an interesting time for traders to start positions either wayas there is no clear strong trend so far and the odds are in favor of more volatility.
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.
