Written Commentary
CRUDE OIL
Despite double low pricing around $73.83 forged in the prior 2 trading sessions and the nearly $3.00 per barrel rally from that double low, we think the bear camp has regained control today. Certainly, a return to definitively positive Chinese and global economic psychology could rekindle bullish control, but sharply rising US crude oil stocks (9 straight weekly gains and the highest since May 2021), rebuilding Cushing Oklahoma inventories and reports of significant Russian diesel supply availability should leave the bear camp with significant ammunition. In fact, without a very significant improvement in global economic sentiment (from clear signs of lower US inflation pressure or from more definitively positive Chinese data) bearish supply news is likely to dominate over bullish demand news. Seeing bullish demand news overcome by bearish supply news this week is a change in pace from the general tone in place at the beginning of this month. While it appears the petroleum complex has been able to put some brakes on its late February selloff, today’s US data and dollar action will test that theme. Fortunately for the bull camp, the Indian government said that their nation’s fuel demand would increase by 4.7% during their next fiscal year, and signs of aggressive Chinese refinery throughput remain in place. The weekly EIA report showed a sizable weekly increase in crude oil stocks which rattled the market, particularly as there have been no withdrawals from the SPR over the past 6 weeks. With no “help” from the SPR, US crude stocks increased by 39.4 million barrels over that timeframe and have reached their highest levels since May 2021.
NATURAL GAS
While Natural gas prices have continued to follow-through on Tuesday’s positive key daily reversal early today and are on-track for a positive key weekly reversal, the prospect of sustained gains should be very low. In fact, even though the weekly EIA storage report showed a drawdown that was slightly larger than trade forecasts, the absolute draw was very low compared to normal seasonal levels and the surplus to the 5-year average stocks level became even more burdensome. In addition to the current cold temperatures across many parts of the US, the latest 6-to-10-day forecast has cooler than normal temperatures from the Plains and Panhandle west to the Pacific Coast but it is getting late to fully reverse below normal winter consumption patterns. However, Cheniere Energy reported quarterly earnings that were well above Wall Street estimates and said that they will expand export operations at their Sabine Pass facility, which in turn should lead to increased US LNG exports but that should only cushion weakness in prices not put them in an uptrend.
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.
