Written Commentary
CRUDE OIL
Crude oil traded in a relatively tight range overnight with a generally positive tone, holding near the top end of the May recovery. Today’s weaker than expected Chinese inflation data may have rattled global risk sentiment, but it seems to have has had little if any impact on petroleum prices. Chinese energy demand views were already sagging, and the inflation news leans in favor of the bear camp. The markets came away from the weekly EIA report with very little reaction, with the rise in US crude oil stocks offset by surprisingly large declines in gasoline and distillate stocks. The implied gasoline demand reading was very solid, which adds to the recent pattern of strong demand signals from that sector. A fresh negative from the supply side of the equation came from Venezuela, where Chevron looks to pump up production again. S&P rekindled global energy demand fears, as they reduced their forecast on Indian demand this year by 40,000 barrels per day. The EIA report showed US crude stocks increased 2.951 million barrels last week, bringing them to 38.370 million above a year ago but 5.799 million barrels below the five-year average.
NATURAL GAS
July natural gas traded in a narrow range near unchanged overnight. The market has managed to rally and build a consolidation pattern above last week’s low despite little in the way of bullish headlines. The trade is likely being limited by evidence of increased US lower 48 production and to a lesser degree by forecasts that El Nino will result in a slow hurricane season. The Reuters survey of expectations for the weekly EIA storage report today calls for an injection of 65 to 82 BCF, which could be the largest of the rebuilding season so far. Prices held up relatively well yesterday in the face of an increase in Canadian exports and from a decline in spot Permian shale prices, the first such decline since October 2020. Even though prices have shown the ability to absorb negative fundamental news with limited damage, the news flow is and will likely remain bearish, especially if today’s EIA report posts an injection in the upper end of expectations and/or the surplus to the 5-year average increases.
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.
