Written Commentary
CRUDE OIL
While the retaliatory strike by Israel on Iran initially prompted a massive spike up move in the crude oil market, ideas that military exchanges will pause, emboldens the bear camp, and leaves the bull camp anxious. Nonetheless, aggressive bullish sentiment remains in the marketplace with Goldman Sachs overnight adjusting its Brent crude oil price forecasts higher for this year and next. Another bullish headline this morning is projections that Saudi Arabia needs prices near $100 to offset the financial blow from their decision to reduce/restraint production. In retrospect, the sharp washout from this week’s highs in crude oil was very surprising especially given the lingering potential for fireworks between Iran and Israel. However, the trade has embraced softening energy demand views this week and repeatedly failed at chart support points which in turn probably triggered waves of stop loss selling. Even though the talk in the trade suggested this week’s washout/setback was based on fresh energy demand concerns, statistics from the product markets conflict with that reasoning. In other words, the US refinery operating rate has returned to the vicinity of 90% and yet gasoline, distillate, and diesel inventories have not been rebuilt. In fact, US gasoline inventories have fallen to the lowest level since December 22nd and this week’s Amsterdam, Rotterdam and Antwerp gasoline inventories declined by 13%.
NATURAL GAS
With a second week of a noted injection to EIA working gas in storage, Middle East supply threats in petroleum moderating and the surplus to the five-year average in natural gas storage remaining high, the bear case remains solid. In fact, mild temperatures and several weather fronts forecast over the coming week, we doubt the bull camp will be blessed with early cooling demand. The weekly natural gas storage report showed an injection of 50 bcf. Total storage stands at 2,333 bcf or 36.4% above the 5 year average. Over the last four weeks natural gas storage has increased 1 bcf.
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.
