Written Commentary
CRUDE OIL
While the new low for the move and the lowest price since early March early today was not a significant decline, the charts have become even more bearish. Even though the markets are not confident that significant oil will continue to move unfettered through the Strait of Hormuz, that news seriously deflates the significant global supply threat in place since late February. In other words, a portion of the energy trade realizes the Iranian situation remains highly fluid and a rogue missile attack (even if unsanctioned by Iranian leadership) could suddenly rekindle supply concerns. It is also possible that fighting between Hezbollah and Israel could prompt Iran to take action to stop oil flow in the region. While not a significant negative development, Norwegian oil production last month came in better than forecast by 2.9%, which follows a 7.2% gain above forecasts in the month of April. In another bearish supply side development Iraq indicated its southern oil field production will rise to around 2.1 million barrels per day as more tankers become available to load because of the cease-fire and recent ship movement. Furthermore, Russian ESPO oil premiums for August have softened in a sign that end of summer demand views are surfacing.
PRODUCTS
Clearly, the gasoline market has not experienced the type of decline unfolding in the crude oil market and that is likely the result of US EIA gasoline inventories of 215 million barrels sitting significantly below year ago and five-year average levels! In last week’s EIA report gasoline inventories were 15.7 million barrels below year ago levels and 14 million barrels below the five-year average inventory level. It is also likely that RBOB is drafting support from the heart of the summer gasoline demand surge. Unfortunately, for the bull camp implied gasoline demand tends to peak seasonally this week and has typically declined sharply immediately after the 4th of July holiday.
NATURAL GAS
While Norwegian gas production softened last month, the concern toward global supply remains muted given the pickup in shipping through the Strait of Hormuz. Fortunately for the bull camp extreme heat in Europe provides support which in turn increases the prospects that natural gas prices will remain range bound until the trade sees the approach of the end of the summer demand season. Furthermore, with 3/4ths of the US projected to have above normal temperatures through July 6th the prospect of respecting consolidation low support is further enhanced.
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.
