Written Commentary
CRUDE OIL
June Crude Oil fell to its lowest level since April 9 overnight after OPEC+ over the weekend agreed to increase production another 411,000 barrels per day for June, the second straight monthly increase of that magnitude. This was not really a surprise, as there had been reports last week that they were leaning that way. The market had bounced well off its overnight lows but was still lower on the day as of this writing. The total combined hikes for April, May, and June are 960,000 bpd. Saudi Arabia and other producers are frustrated with overproduction on the part of Iraq and Kazakhstan and appear willing to sacrifice price for market share. This has pushed aside bullish support from ideas that US sanctions will cut off Iranian supply. Goldman Sachs says they anticipates a final OPEC+ production increase in July of 410,000 bpd. The Baker Hughes rig count showed US oil rigs in operation were down 4 rigs to 479 last week, which was down from 499 rigs a year ago but above the five-year average of 463. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 6,702 contracts of crude oil for the week ending April 29, increasing their net long to 154,032. This is their largest net long since January but still in the lower part of the range since 2020.
NATURAL GAS
July Natural Gas extended its rally overnight to its highest level since April in the face of collapsing oil prices, but it has fallen back near unchanged this morning. Lower crude oil prices will pressure US oil production, which could reduce gas production on joint wells. The Baker Hughes rig count showed US natural gas rigs in operation were up 2 rigs to 101 last week. This was down from 102 rigs a year ago and below the five-year average of 118. However the total oil and gas rig count was down 3 to 584, which was 3% below this time a year ago. A mix of above normal/below normal temperatures across the lower 48 during this shoulder season should keep heating/cooling demand soft. The 6-10 day forecast has much above normal temperatures in the northern Plains and above normal across the western half and northern half of the US but below normal across the southern US from Texas eastward. The 8-14 day has above normal across most of the eastern two-thirds of the lower 48, with below normal along the west coast. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 18,274 contracts of natural gas for the week ending April 29, increasing their net short to 44,297.
PRODUCT MARKETS
Product prices fell overnight in reaction to the news that OPEC+ had agreed to another sharp increase in production for June, but both bounced off their lows, as the news was not really a surprise. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 5,442 contracts of RBOB for the week ending April 29, increasing their net long to 23,328.
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.
