Written Commentary
CRUDE OIL
Fundamentals largely remain in the bull camp from overnight news. Fresh positives include a very minimal increase in API crude oil stocks (despite aggressive SPR releases), projections of a 3% drop in Russian oil loadings at ports for the first 10 days of June and renewed strength in Asian jet fuel premiums. Other bullish developments from the overnight trade are views that a strengthening of Brent/Dubai crude oil spread highlights ongoing demand recovery in the US and Europe! In an indirect support for crude oil API gasoline stocks yesterday declined by a very significant 4.2 million barrels. Another supportive but suspect issue for the markets is a prediction from the US National Oceanic and Atmospheric Administration predicting 21 tropical storms in the coming hurricane season.
The gasoline market has forged a fresh higher high and a 5 day high early today in the wake of a much bigger than expected contraction in API gasoline stocks of 4.2 million barrels. Limiting the upside in gasoline is the potential for the Biden administration to reduce pollution supply restricting summer pollution regulations and or the potential for a US ban of energy exports in hopes of deflating retail pump prices. The API survey showed US gasoline stocks had a weekly decline of 4.233 million barrels which was a much larger decline than market expectations. With the summer driving season starting in force this weekend, further tightening of supply from the EIA weekly report today could send prices back to the May highs above $3.8726.
NATURAL GAS
The natural gas market continued its strength yesterday despite an 11% decline in UK retail gas prices, reports of increased Russian pipeline flow to the West and a cooler US forecast for the next 15 days. On the other hand, it should also be noted that NOAA has predicted above average storms (21) in the coming hurricane season, but it will likely take a “named” storm early to see the market fret over hurricane supply losses. In a similar longer-term bullish development, energy experts in Europe suggest that most European countries will enter the 2022/2023 winter with below normal LNG supplies.
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.
