Explore Special Offers & White Papers from ADMIS

Oil Prices Are Vulnerable to Demand

CRUDE OIL

We see the strength in the crude oil contract this morning as a function of yesterday’s oversold action, from increased Asian demand for special diesel producing crude oil and from signs of strong European buying of Russian Urals crude oil. An indirect support for crude oil this week has been a significant jump in Indian import volumes in the latest backward-looking statistics. While the focus of most markets remains on the Ukraine, oil traders should not forget ongoing Iranian nuke negotiations. Like many physical commodity markets yesterday, the energy complex came under significant selling from escalating demand fears and demand fears remain in place this morning even without them in a front and center position.

Even the product markets came under noted selling pressure yesterday, and that sets a negative tone for today’s action. Obviously, demand destruction is not limited to the oil market especially following news of a city being quarantined in China. Furthermore, there are signs that the breakout in Beijing is worsening dramatically and that is a major demand destruction threat.

NATURAL GAS

While the natural gas market forged a 3-day high yesterday, the bull camp should be disappointed in the lack of a significant rally given a lack of diplomatic progress between the US and Russia over the recent weekend. However, consolidation support should be thickened by reports overnight that LNG tankers are once again diverting from Europe back toward Asia! In fact, overnight Qatar indicated it could not satisfy European gas needs in the event Russia cuts off flow to the region. Also, the latest reports show Russian gas flow remains from west to east in the key pipeline thereby leaving Europe without the ability to rebuild ultra-tight supplies.

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.

Latest News & Market Commentary

Explore Special Offers & White Papers from ADMIS

Get Started