US Crude Stocks Reach 16-Month High
While the energy markets were a clear laggard during Thursday’s “risk on” trade, they have benefited this morning from improvement in both the Chinese and global demand outlook. December crude oil was able to climb into positive territory yesterday after reaching a new 2-week low and has seen significant upside follow-through early today. China’s move to ease quarantine requirements for inbound travelers may be a small step but is a signal that their “Zero Covid” policy may be relaxed further. There were reports that officials have reinstituted Covid restrictions in the major city of Guangzhou this week, however, so the market may need more evidence of a shift in policy for energy markets to fully benefit. The latest EIA report showed US crude oil stocks reaching a 16-month high, which was seen as further evidence of lukewarm domestic demand which has weighed prices this week. However, a much lower than expected set of US CPI readings triggered a massive “risk on” rally across many market sectors, and that gave a boost to the energy demand outlook. The EIA’s latest Short-Term Energy Outlook report showed US crude oil production last month at 12.13 million barrels per day (bpd) which matched September for the highest production rate since March 2020. This will put added attention on the weekly Baker Hughes US oil rig count, as any uptick would put US rigs at their highest levels since March of 2020.
In spite of volatile action over the past 4 sessions, natural gas prices remain within striking distance of a positive weekly result. December natural gas held within an inside-day range as it was able to finish Thursday with a sizable gain, but is finding mild pressure coming into this morning’s action. In addition to the rebound in risk appetites, natural gas benefited from a lower-than-expected weekly net injection of 79 bcf in the latest EIA weekly storage report. The latest 6 to 10 day forecast has below normal temperatures across most of the US, and that follows unseasonably cold temperatures seen across the upper Midwest and upper Plains states this week. This should result in a sharp increase in residential, industrial and power plant demand over the rest of November. There were reports that the Euro zone’s Bergermeer gas storage site has reached 100% capacity, while overall Dutch gas storage is at 92% of capacity. With the US likely to start drawing down natural gas supplies over the next few weeks, the market can see upside follow-through during today’s trading. Near-term support for December natural gas is at $6.060 while resistance is up at $6.400.
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.