Explore Special Offers & White Papers from ADMIS

US PCE To Impact Energy Trade


While we expect today’s US inflation reading to impact the first several hours of trade in the energy complex, the bear camp is likely to garner the edge after outside market influences moderate. In fact, business sentiment in China registered a record low from unrelenting Covid restrictions, with projections of millions returning to lockdown and the number of cities seeing fresh restrictions expanding. Other demand signals overnight were mixed with Japan posting a 5.1% jump in September crude oil imports while Indian September crude oil imports declined at the largest pace in 18-months. On the other hand, China reportedly stepped in and bought significant barrels for refiners this month to ramp up fuel exports. Therefore, reports of severe diesel supply tightness in Europe and two-year lows in Chinese diesel inventories should provide indirect support to crude oil going forward. The bull case already had tight diesel supply forces at work earlier this year and with colder temperatures approaching next month, diesel/distillates could soon play catch up to the gains in gasoline and in turn raise fair value pricing in crude oil. The trade should continue to see lift from next week’s looming implementation of OPEC+ production cuts, even though the cuts are expected to be half the agreed upon amount. However, the bull camp is also benefiting from an improvement in energy demand expectations prompted by less fear of Fed overtightening, but that view could be tested today following US PCE. Certainly, seeing US weekly crude oil exports rise above 5 million barrels per day in the face of a very highly valued US dollar signals better international demand.

oil pumping


We leave the edge with the bear camp in natural gas as US and European forecasts into the end of the first week of November call for mild temperatures. In fact, temperatures in New York City next week could reach 68 degrees Fahrenheit (20 degrees Celsius) with warm to mild temperatures also seen in the Eastern “half” of the US. In retrospect, the natural gas market failed to hold up in the wake of a “smallish” weekly EIA injection to storage yesterday and that might be the result of predictions that total European gas storage could end the coming winter at 33% of capacity. Furthermore, prices were not supported despite the week over week expansion of US working gas in storage deficit to the 5-year average. Total storage stands at 3,394 bcf, or 5.5% below the 5-year average. Over the last four weeks, natural gas storage has increased 417 bcf. It should be noted that working gas in storage in the US should begin to fall in the next 2 weeks according to seasonal history. We leave the edge with the bear camp with weather remaining bearish through the end of next week and the market yesterday failing to find support in the wake of a very small weekly injection figure. The latest estimate on the return of the Freeport export facility has not been established yet although some feed gas deliveries were made to the facility last week.


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.

Latest News & Market Commentary

Explore Special Offers & White Papers from ADMIS

Get Started