European Commodities: Markets Get a Warning from Volatility Futures

European Commodity Winners Last Week

Dutch TTF Gas (TGZ24), +8.5%

The market is following the current negotiations to provide gas from Azerbaijan to Europe via Ukraine. European gas storage is currently over 95% full, providing a strong buffer against potential winter supply issues.

While tensions in the Middle East have sparked some concerns about global supply, Europe has seen steady liquefied natural gas (LNG) deliveries, particularly from the U.S., Qatar, and North Africa.

The TTF December contract is trading above the 10, 20, and 40-unit exponential moving averages (EMAs). However, it is still trading within the 37.50-44 range, and 44 is a key resistance that's hard to break. 

The daily Relative Strength Index (RSI) marks 62.22, still some distance from the "overbought" 70 mark. Given the current fundamentals, short traders will open positions around the 44 level.

Rapeseed (XRG25), +4.26%

After high production in the previous season, a drop in sowing areas across Europe, Canada, and the Black Sea region is projected for the 2024/25 harvest.

Surplus from previous seasons lowered prices and discouraged some planting. The EU's rapeseed acreage is expected to fall by about 2.7%, but demand remains steady, supported by the vegetable oil, biodiesel, and animal feed industries, helping to stabilize prices. 

Despite a good global supply of vegetable oils, prices for rapeseed have rebounded, influenced by tighter supplies of competing oils like sunflower and palm oil. Additionally, Australian and Ukrainian output has decreased, making European import needs more competitive.

These market conditions suggest that while global supply may stay sufficient, rapeseed prices could continue to see upward pressure.

Nickel Cash (P7Y00), +2.97%

There are concerns about oversupply, with recent increases in production from major producers in Indonesia and China. The discovery of new nickel deposits, such as those in Papua New Guinea, have added to the market’s supply​.

Despite some production cuts by high-cost miners in Australia, these surpluses have led to a drop in nickel prices, with the average price forecast to remain lower than 2023 levels.

On the demand side, the growing use of nickel in electric vehicle (EV) batteries remains a key driver. Although the demand for nickel in EV batteries is still small relative to other industries, like stainless steel, it is expected to surge dramatically.

LME current nickel stock at 150,252 tn shows a recovery from the 2023 lows; however it is an average level. LME Net Fund positions at -7,634 contracts (as of Nov. 1) reveals a rather bearish mood for this contract.  

The contract is trading below the daily 10, 20, and 50 EMAs, and is approaching the key support of 15,500. This area presents a unique technical opportunity to open long trades.  

European Commodity Losers Last Week

VSTOXX Futures (DVZ24), -11.45%
Since September, the European volatility index has formidable resistance at 19. This was also the case on the eve of U.S. elections, which increased volatility to that level.

Now, the market should be worried, as statistically this index does not remain below 16 for too long.

This should be a warning for the next weeks across all EU stock indices.

Crude Oil Brent (CBF25), -4.24%

The current range is just a reflection of the mixed sentiment in the market.

OPEC+ members are not increasing supply in order to reverse falling crude prices. Weaker-than-expected demand from China and a strengthening U.S. dollar all add to the bearish mood.

In contrast, the current Israel-Iran conflict and the potential for escalation could send prices up. For now though, this seems to be contained.

Brent oil is locked in a range with the top at 76 and bottom at 70. The latest move is bearish, as it is now trading below the 10 (73.83), 20 (73.85). and 50 (74.55) EMAs. This action is within the range, 
so traders will still initiate long positions at 70 and short traders will take profits here.

If prices break below 70 for a full week this will establish a downtrend. For now, just play the range.

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