Written Commentary
CRUDE OIL
With a higher high extending last week’s recovery and putting crude oil prices into a fresh upside breakout, the bullish tilt from last week has been extended. While there have been recent signs of softening US energy demand, signs of residual strength in Asian demand have apparently taken precedence. In another sign of residual Asian demand and Russian compliance with output reduction agreements, reports are Russian discounts on sales to China have narrowed and that should embolden the bull camp. On the other hand, the prospect of tighter supply has also been a key element of the bull case with the primary catalyst hope and recent evidence of reduced Russian August shipments. Another minimal fresh supply-side development for crude oil is a 2.2% decline in floating storage from weekly figures provided by Vortexa. Even though a slight downtick in US implied gasoline demand from 3 weeks ago is not a significant negative for crude oil, the trade is sensitive to any signs of softening demand, especially with crude oil currently $11 per barrel above the late June lows. However, Indian crude oil imports increased by 0.6% in June and Chinese import/implied demand readings keep demand as a supportive development. In the near term, if a risk on vibe remains in place, the bull camp retains the edge.
NATURAL GAS
While the natural gas market will continue to get support from hot temperature forecasts, there were suspicions about the upper end temperatures forecasted in last week’s trade and some chatter suggesting heat might not entrench. In a not surprising bearish headline, the Russian state gas transit service indicated that Russian shipments of gas to Europe yesterday were up slightly from the day before. A longer-term bearish headline overnight indicates European gas storage is now roughly 83% capacity compared with the five-year average at this time of the year of roughly 68%. In the end, the Russians have not shown any sign of reducing flows despite the escalation of political maneuvering in the war. While temperature forecasts can change, forecasts as of this writing do not show US heat to be excessive, widespread or sustained and therefore the bear camp has the edge.
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.
