Written Commentary
CRUDE OIL
The crude oil market this week certainly behaved like other supply and demand besieged physical commodity markets with a probe to multi month lows. However, given the breadth of bearish supply fundamentals we suspect nearby crude prices could decline another four dollars by the end of the year. In fact, Macquarie group overnight projected prices down to $50.00 off “punishing oversupply”. In retrospect, energy prices have been cushioned over the past several months by aggressive Indian and Chinese restocking and over the past two weeks there are signs/developments suggesting the restocking might be complete or shifting toward de-stocking. Therefore, sagging demand fears look to be joined by rising production/supply as evidenced by a 400,000 barrel per day increase in OPEC September crude oil output. The largest production gains in September came from the largest producer Saudi Arabia and surprisingly from Iran and Libya.
NATURAL GAS
Apparently, the EIA released the weekly gas storage report yesterday and that report showed the smallest injection since August 22nd and resulted in the surplus to the five-year average declining from 6.1% to 5.0%. As indicated yesterday, US and European weather continues to favor a rapid rebuilding of winter supplies despite record US demand registered last month, as that was more than offset by record US monthly production. However, the short-term trend has shifted upward with the daily drone attacks between Russia and Ukraine keeping a supply threat in place.
PRODUCTS
While December gasoline prices respected and then rejected the $1.80 level yesterday, we doubt that critical support level will hold over the coming weeks. Reports of a significant disruption of jet fuel production at a Los Angeles refinery is unlikely to cushion the product markets or the crude oil market. In fact, US gasoline supplies jumped sharply last week and returned to year ago levels. On the other hand, seasonal gasoline supply should continue to fall over the next three weeks from seasonal turnaround and from typical seasonal demand softening. If there is a catalyst for a shift into an uptrend in the product markets it is likely to be sparked by the diesel market.
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.
