Written Commentary
CRUDE OIL
Obviously, the petroleum markets are under a measure of pressure from escalating Chinese energy demand threats as Chinese equity markets continue to plunge, setting off margin calls which in turn could spark an economic/financial markets contagion. Overnight the petroleum markets added a measure of bearish chart action to the equation with a six-day low and a distinct failure of the 200-day moving average at $75.44 yesterday. It is likely that energy prices will find some support from a breakdown in the dollar and from a significant downside breakout in US treasury yields. Other and seemingly discounted bullish developments came from suggestions that OPEC+ would consider the extension of the production restraint agreement in their next meeting and from overnight news that OPEC January crude oil output declined by 490,000 barrels per day. However, the dominating bearish theme at the end of this week is chatter of a Gaza cease-fire. Therefore, it is not surprising to see the March crude oil contract today reach the lowest level since January 23rd, but we caution the bear camp against expecting the direct progression to a cease-fire. A longer-term support for prices came earlier in the week from a Saudi decision to halt oil growth plans because world energy demand will likely not grow enough to fully utilize extra supply. In another but indirect support for oil prices came from Shell oil company who announced higher dividends in a possible sign that the company could be paying out cash to investors as opposed to plowing investment into future projects.
NATURAL GAS
Not surprisingly, the natural gas market posted another new contract low yesterday as US temperatures look to remain mild, Japanese, gas imports dropped, and January US exports are expected to decline because of US export facility problems arising from extreme cold last week. We also see the prospect of slowing global industrial demand for LNG after a wave of soft global manufacturing PMI readings this week. In fact, Bloomberg overnight suggested that ongoing volatility in European gas prices has “hindered industrial recovery” Not surprisingly, the in-range contraction in weekly EIA gas in working storage favors this week favors the bear camp going forward, especially with the net spec and fund short in gas remaining relatively modest.
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.
