Written Commentary
CRUDE OIL
The crude oil market is likely to see a significant and perhaps temporary wild gyrations to outside market/big picture developments from the US Fed Chairman speech today. Clearly the trade sees this morning’s events/data as a fresh signal on the direction of energy demand. However, seeing the largest US oil fund ETF suffer the most significant liquidation since late July yesterday might be a major pivot in investor views toward crude oil prices or more likely that exodus could be a temporary reduction of risk into the Fed speech. Apparently, the crude oil market this morning is drafting minimal lift from market chatter that ultrahigh gas prices will result in marginal shifts to petroleum feedstock use this winter in Europe.
After displaying significant relative weakness to crude oil and diesel prices this week, a fire at a critical US Midwest refinery should provide October gasoline with solid support at the $2.60 level. BP shut down two crude oil processing units at a 435,000 barrel per day refinery in northern Indiana and this hour the company is unsure of the damage and the duration of the shutdowns. However, traders should expect expanded volatility this morning because of big picture outside market impacts. Unfortunately for the bull camp, China posted a significant apparent demand decline in July in several product markets and the trade saw a record weekly Amsterdam, Rotterdam, and Antwerp gasoline storage readings.
NATURAL GAS
Clearly, the natural gas market has stalled just above the $9.00 level, and part of that pause is likely associated with simple macroeconomic uncertainty. However, the pause in the upward motion in gas prices was also likely the result of a further delay in bringing a key US gas export facility back to full capacity. In fact, with the weekly EIA gas storage injection this week near the upper end of the anticipated range and US cooling demand has moderated consistently, leaving the bear camp with a strong case of bearish supply and demand news. On the other hand, a wildcard in the supply set up is the potential for Russia to reduce flow to Europe even further without notice.
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.
