Written Commentary
CRUDE OIL
After some mild optimism last week, demand destruction fears have returned to front-and-center. Global risk sentiment seemed to take a positive shift late Monday, but appetites have soured again following lukewarm economic data from Europe. As a result, crude oil has fallen back under pressure with moderate losses overnight. The EIA has forecast US shale oil basins to reach their highest output since March 2020 next month, and Permian Basin crude output is expected to reach a record high.
Both product markets finished Monday with heavy losses, but they are diverging today, as ULSD continues to outperform RBOB due to a tightening supply in Europe. There are projections for China’s August fuel exports to reach their highest level for the year, but the 2022 total is still expected to be the lowest annual reading in seven years. RBOB remains on the defensive as US retail prices continue to fall. Even with the sharp price drop, July’s driving demand fell below 2020 levels, which does not bode well for prices going into the final weeks of the summer driving season.
NATURAL GAS
The tight European natural gas market appears to have lent carryover support to the US market. October natural gas finished Monday with outside-day trading session and a modest loss, but it climbed to a three-week high overnight. Cooler than normal temperatures in the forecast for large portions of the continental US are expected to diminish power plant demand, and US LNG export capacity continues to be restricted by the closure of the Freeport terminal for repair, which has resulted in a 1.8 bcf/day decline in US exports.
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.
