Written Commentary
CRUDE OIL
With higher price action early today the bull camp has clearly embraced threats from Moscow to cut oil output by as much as 7% because of the implementation of the price cap. While the ultimate bullish impact from the global price cap is highly suspect, unilateral decisions by Russia to cut physical production would have the same impact as a broad global respect for the embargo rules. Seeing the potential for Russia to cut its production by 500,000 barrels per day/700,000 barrels per day would clearly have a substantial impact on international prices. Unfortunately for the bull camp a growing fear of slackening demand tempers the bullish impact of lower Russian exports.
The outlook for product demand in the US is very difficult to determine as a winter storm might dent US demand for gasoline while Chinese demand for fuel has been producing conflicting signals. The latest traffic/activity readings posted a decline in Chinese congestion and given the higher high in gasoline futures this morning it is possible US demand for gasoline will surprise on the upside as travelers are forced to seek other means of transportation in the wake of massive flight cancellations.
NATURAL GAS
With the natural gas market failing to sustain support from a relatively large weekly EIA gas in working storage withdrawal and are forging lower low action this morning in the face of a distinct Russian threat against oil supply that highlights ongoing bearish control. Even more surprising is the markets downside extension following headlines indicating Russia’s global gas exports are still 20% of total global exports! However, despite the large withdrawal, US gas storage levels are now at a small surplus to 5-year average storage levels which in turn tempers fears of a severe winter shortage in the US.
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.
