Written Commentary
CRUDE OIL
With an early new high from the move, the bull camp in crude oil has extended control into the new trading week. While last week’s US inventory data challenged the tight global supply argument, the bull camp has shifted its focus toward threats against Middle East supply. While the Arab world was relatively calm late last week with the retaliation by the Israeli army expanding, the beginning of a ground incursion into Gaza and calls for Palestinian people to move to the south of Gaza, leaves headlines from the Middle East as likely a major catalyst for oil prices. Clearly, Chinese energy demand expectations could be questioned following their trade data and from reports their refinery activity has declined to the lowest levels in two months. However, Iran is a major swing producer of low-grade global diesel supply. However, so far blame has not been officially cast at Iran and there is no reason to expect an export ban on Iran as that would send global oil prices through $100 and diesel prices would certainly explode. A minimally supportive fresh development today is a week over week decline in global crude oil in floating storage especially with Asia-Pacific and US Gulf Coast inventories down.
NATURAL GAS
The natural gas market showed virtually no sensitivity to the outbreak of war in the Middle East and is unlikely to see lift from the beginning of a ground war and even from surging petroleum prices. In a very negative longer-term fundamental impact Bloomberg news projects global LNG supplies will “rise 21% this winter”. However, the massive oversupply condition in the US has continued to moderate but still maintains a 4.8% surplus to five-year average stock levels. Furthermore, with Russian Gazprom officials indicating shipping via Ukraine to Europe remains steady, and no indication Russian culpability of the destruction of a gas line under the Baltic Sea supply flow from the Baltic region is limited.
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.
