Written Commentary
CRUDE OIL
Even though crude oil this morning has posted positive action, our view toward the market is bearish. In fact, last night the API showed a massive jump in crude oil stocks, crude oil in European storage increased by 2% on a week over week basis, forecasts suggest China is poised to see the largest demand decline in 30-years, OPEC August output increased by 618,000 barrels (because a return of Libyan supply) and we think energy demand will remain suspect because of macroeconomic slowing fears. On the positive side of the supply ledger, Saudi Arabia has indicated they have maxed out their current production capability.
This week’s Reuters poll projects EIA gasoline inventories to decline by 900,000 barrels per day, but the API yesterday saw its inventory levels decline by a very notable 3.23 million barrels. However, to avoid a 2nd straight week of EIA surplus gasoline supply readings (relative to year ago levels) might require a much larger than expected outflow of EIA supply. On the other hand, implied gasoline demand last week surprised the trade at 8.72 million barrels per day as that was the highest implied demand reading since August 12th. The API survey showed US distillate stocks had a weekly increase of 1.75 million barrels yesterday which is a much larger increase than trade forecasts.
NATURAL GAS
While the natural gas market forged a higher high again overnight, the trade seems to be partially discounting positive news. Perhaps natural gas is being limited by deteriorating macroeconomics, or because France is expected to implement a program to reduce winter demand and because Germany is considering nationalizing its largest gas importer. It should be noted that a tropical storm has organized in the Atlantic Northeast of South America and that should provide some speculative buying.
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.
