Another Upside Breakout in Crude
With another upside breakout in crude oil this morning and prices posting the highest prices since last August, sagging economic expectations and a significant weekly inflow to EIA crude oil stocks yesterday, the bull camp clearly has ongoing resolve and can discount negatives. Fortunately for the bull camp, EIA product stocks tightened, and the weekly implied gasoline demand reading jumped aggressively to a lofty at 9.3 million barrels per day providing positives to offset higher US crude availability. It is also possible that buyers are pre-positioning for the seasonal increase in tropical storm activity, and it is also possible that buyers have been brought in off news the US is moving to rebuild strategic supplies sold off to dampen prices last year. While less direct, news that Ukraine plans to target all Russian ships and ports with drone attacks and recent broadening of the type of attacks on both sides of the battle lines should put some premium into petroleum prices. Another likely catalyst behind the extending strength in crude oil prices is the return of fund money which is probably stoked further by this week’s upside breakout in prices. Furthermore, reports of hard declines in tanker rates because least partially confirms Russian compliance to its output reductions. EIA crude stocks rose 5.851 million barrels and are 13.612 million barrels above year ago levels.
Once again, the sharp range up extension in natural gas seems out of place with US cooling demand more seasonal than extreme, Europe holding large inventories relative to seasonal levels and given signs of reduced flow to US export terminals. On the other hand, we would not rule out further gains from European strategic supply rebuilding, concerns of lost supply from strikes at LNG facilities in Australia and from lower global production resulting from a wave of maintenance. Unfortunately for the bull camp, once European inventories return to capacity well ahead of the start of heating season, natural gas prices could be vulnerable to significant corrective action. Another element behind the rally in natural gas this week is two straight weeks of smaller than anticipated weekly injections. While the charts favor the bull case with the upside breakout extension yesterday, finding bullish fundamentals capable of projecting prices even is difficult at best. A portion of this week’s buying could be from speculation on seasonal pickup in hurricane activity or from hot US East Coast temperatures.
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.