Written Commentary
CRUDE OIL
In addition to yesterday’s classic chart reversal from the lowest price since early December, the theme of strong demand from China continues and results in a bullish environment to start today. While the International Energy Agency expects global crude demand to rise, they think 1st half demand growth will come from China which remains in a state of limbo given a lack of knowledge of the situation inside China. However, reports that the Saudis have raised their March crude oil prices to Asian customers by 20 cents a barrel, may reflect some improvement with the Asian demand outlook. While initial reports said that severe earthquakes have not damaged key pipelines in Turkey, news that the BTC export terminal in Ceyhan, Turkey will be closed through Wednesday provided fresh support to crude oil prices. The BTC terminal exports crude oil from Azerbaijan to international markets. While their current production quota is comparatively small to other OPEC Plus members, the shutdown in Ceyhan comes as fresh sanctions and price limits are being applied to Russian crude oil and refined products. Unfortunately for the bull camp forecasts this week suggest the lack of a change in OPEC+ production restraint agreement could result in a first half global oil surplus. Another bearish outside market influence on crude oil are reports that diesel refining margins have plummeted and the latest fuel export restrictions on Russia might have had the opposite impact from expectations. At least to start today the bull camp has the edge off residual Chinese demand optimism and from generally positive global equity market action.
NATURAL GAS
While the natural gas market has not regained upside momentum just yet, it appears to have put some brakes on its 8-week long selloff. However, the natural gas market also saw its downside momentum pause for 3 days between January 20th and January 24th and ultimately declined $0.60. There have been further indications that the Freeport LNG export facility is restarting its operations, with company statements claiming they have restarted supply flow trains to the export facility. Unfortunately for the bull camp the restart of export flow from the Freeport facility has been predicted to restart export flow periodically for months. However, the latest 6-to-10-day forecast has above normal temperatures from the Great Plains and Panhandle all the way east to the Atlantic Coast, but that is partially offset by well above normal temperatures in the mid-Atlantic and New England. While there were gas pipelines that were damaged by the Turkish earthquakes, the major TANAP pipeline has not reported any disruptions so far. The market remains severely oversold and could see a sharp short covering if Freeport export flow is physically confirmed.
Interested in more futures markets? Explore our Market Dashboards here.
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.
