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Is the surge in natural gas and nickel sustainable?


MongiIG

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US natural gas and nickel are taking a breather following their swift advance.

BG_copper_nickel_ore_908098.jpgSource: Bloomberg
 Axel Rudolph | Market Analyst, London | Publication date: Tuesday 08 March 2022 

US natural gas taking a breather following surge higher

Natural gas prices in Europe remained at historically high levels but below recent record highs, following threats by the Deputy Prime Minister of Russia, Alexander Novak, to cut Nordstream 1 supplies amid talks of an embargo on Russian oil and gas by the United States.

This, however, received a luke warm reception in Germany and other western European nations who rely heavily on gas and oil imports from Russia. Nonetheless the European Union is meeting today as it tries to cut dependence on Russian gas and oil by about two-thirds within a year by looking for supplies from elsewhere, ramping up domestic green energy and coal production while keeping German nuclear plants running longer than previously intended.

In Asia, LNG spot prices hit unprecedented levels last week in a bid to divert some shipments away from Europe, boosting competition for American LNG cargoes.

08032022_NG-Daily.pngSource: ProRealTime

 

In the wake of these developments the US natural gas, IG Daily Financial bet (NG DFB) has risen by over 15% since the beginning of the month to its current February high at $5.18 per million British thermal units on Tuesday, before rapidly coming off towards the 200-day simple moving average (SMA) at $4.39 amid prospects of lower weather-driven demand after mid-March.

While the next lower early March low at $4.35 holds, though, the uptrend - which began in mid-February - remains intact, driven by stronger overseas demand, especially from Europe and Asia.

A rise above this week’s high at $5.18 would engage the late November and early February highs at $5.43 to $5.51.

Can the +300% price rise in nickel continue?

The price of nickel, used in stainless steel and electric batteries, has risen by an incredible 316% since the beginning of the month with Russia producing 17% of the world’s top-grade nickel.

The base metal briefly surged to over $100,000 a ton as worries over supply increased as the sabre rattling between Russia and the West intensified.

08032022_NICKEL-Daily.pngSource: ProRealTime

 

The spike higher occurred as short-positioned traders had to cover their shorts at any cost in a thinly traded market with relatively low liquidity, provoking a short-squeeze.

Given the fact that this parabolic rally stopped around the psychological $100,000 mark, a retracement lower towards the $50,000 level may ensue in the coming days as the situation normalises.

If the current all-time high were to be exceeded, however, it would be anyone’s guess where the price of nickel could rally to.

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