CRUDE OIL
With a 7 day high in August crude to start today forged in the face of soft global equity market action, the focus of the crude oil trade remains on anything related to Chinese energy demand. Clearly, the trade has discounted statements from the Chinese National Petroleum Corporation pegging their oil demand this year to see slower “growth” than last year with a year-over-year gain of only 3.5%. However, evidence of strong Chinese imports of crude oil have been seen from Russia, Kuwait, and other Middle East exporters. While some traders have discounted the increase in Chinese crude oil imports to typical improving seasonal and summer demand patterns the reality is more oil is disappearing from the world market. Positive Chinese energy demand expectations have been further bolstered by strong Chinese traffic level measurements from Bloomberg news. While the Chinese interest rate cut has not lifted global sentiment early on today and critical Chinese physical commodity inputs are soft, the rate cut should be an underlying fundamental support for energy prices today. The positive tilt from Chinese oil import figures is tempered significantly by indications from the Russian president that output in his country is growing! However, the Chinese National petroleum Company does expect 2nd half oil demand to accelerate, thereby making up for a slow first half.
NATURAL GAS
The natural gas market appears to be extending last week’s recovery off ideas that US and European cooling demand is beginning to ratchet up and there has been reduced water flows in Norway and lower wind power supply in Europe which adds to the early upward price bias. In a minimal supply supportive development, private estimates of LNG floating inventories showed a decline of 10% versus the previous week. In a longer-term bullish development China indicated they will sign a 27-year LNG import deal with Qatar even though that movement will not start until 2026. While some might see the potential for a hurricane entering the Gulf of Mexico later this week as a supply threat, a storm that delays US LNG exports could be a more significant negative demand threat.
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.