CRUDE OIL
While crude oil prices are trading higher in the early going today, we suspect the gains are primarily technical short covering from yesterday’s hard range down washout. In fact, the war premium could shrink further as Israel seems to be “rethinking” or “delaying” the ground war because of international diplomatic pressure and fear of a flurry of domestic terrorist attacks if they do move forces into Gaza. Furthermore, the release of some hostages might deflate anxiety, but Hamas is likely to retain enough bodies to maintain what little leverage that provides. However, the IDF continues to bombard suspected Hamas positions. Tempering the potential negative bias from expectations of a delay in the Israeli ground attack is yesterday’s third straight day of large inflows to the United States Oil Fund ETF. While we leave the edge with the bear camp today it seems investors have “bought weakness” which could increase respect for the $85.00 consolidation low support zone later this week. Fresh bearish overnight developments include a 184,000-ton January through September increase in Chinese offshore oil production and from IEA predictions that global oil demand will peaks later this decade. However, the trade did not fail to notice the US president over the weekend placed 2,000 troops on a higher alert level last week and is moving assets to the region and that is not lost on the Arab world.
NATURAL GAS
Even though December natural gas may have found some value at $3.25, the market lacks a clear fundamental reason to forge a sustained bottom. In fact, near-term US and European temperatures are mild with an upcoming shift in the weather not expected to spark a significant jump in heating demand. Adding to the bearish track is a reduced global gas demand view from the IEA reportedly from increased renewable energy use and electric vehicle use. Other bearish overnight developments, include the Biden Administration move to block the construction of what would be the largest LNG export facility in Louisiana, overnight reports that European strategic storage is now 99%, signs of softening Chinese LNG imports and a 5.8% increase in floating LNG supply. In conclusion, with a fresh contract low yesterday and a wave of bearish fundamentals more contract lows are possible.
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.