Written Commentary
CRUDE OIL
While the markets have not encountered fresh developments in Iranian nuclear talks for some time, a potential restart in talks (reportedly within days) provides energy markets with a fresh negative supply orientated issue. In fact, EU officials are reportedly pushing for a quick deal, and we suspect the US President sees a weak deal as preferable to further energy price inspired inflation. Certainly, near-term direction in energy prices is likely to be down, with the key focus of the trade growing expectations of softening global energy consumption. While a longer-term impact, the oil and gas inflation reduction act of 2022 apparently fosters offshore US production ventures with less restrictions on drilling leases. In the near term, increased Libyan output, positive US production headlines and the potential for another stepwise increase in OPEC plus allowable output on Wednesday clearly signals a trend of bearish supply side developments.
While the gasoline market has seen positive European demand (Spain) overnight, reports of rising US imports of European gasoline should give the bear camp confidence. Apparently, Spanish road fuel consumption in June improved with gasoline consumption up 3.6% versus year ago levels. With gasoline prices at times yesterday testing the lowest levels since April, the June and July correction expands to 34%. Obviously, the trade moved to extract demand from the equation from escalating recession fears fostered by an avalanche of softer than expected global manufacturing data yesterday.
NATURAL GAS
While the natural gas market plummeted with a 4th straight lower low yesterday, the market initially managed to reject that spike down move and at times Monday traded $0.46 above the early low! However, chatter of record US production, an increase in US export terminal inventories of 3.6% versus last week and a tempering of extreme heat in the US East Coast should send September natural gas prices back to the low yesterday at $7.753. Bearish overnight news was countervailed by evidence that the Russian national gas company (Gazprom) saw a 12% decline in gas production in the first 7-months of 2022. According to the Russians, the repair and restart of the Nord Stream 1 pipeline is “out of their hands”.
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.
