Written Commentary
CRUDE OIL
With headlines trumpeting a slight downgrade in the status of hurricane Laura, reports that China might have finished its “foreign oil buying binge” and news that US air passenger numbers remain 74% below year ago levels it is not surprising to see crude oil start off under some pressure. In the end we do not expect the hurricane to leave a sustained disruption in place with the markets attention quickly shifting back to the demand side of the equation once the light of day gives some clarification to damage on the ground. It should be noted that US crude oil and gasoline stocks remain well above year ago levels, and therefore a moderate setback in supply might not be as impactful as many might expect.
NATURAL GAS
While the hurricane could surprise us with significant damage to natural gas production and infrastructure onshore, we see that as an unlikely outcome and make note that supplies in the US remain 15.1% above the 5-year average storage levels. We continue to think that the natural gas market is an outright sell with prices losing momentum, forging a quasi-triple high and closing lower in the face of a serious upgrade in the strength of the hurricane yesterday. Furthermore, it should be noted that the storm has fully traversed the physical production areas and export facilities have been constructed to stand up to very serious hurricane force conditions, and therefore it is possible that natural gas will get back to normal much quicker than the petroleum market.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
