Written Commentary
CRUDE OIL
The energy markets face a critical junction today from the US CPI report. In fact, overall global sentiment faces a key junction today with an abatement of inflation tempering rate hike fears and tempering significant anxiety flowing from equities. However, market chatter suggesting the removal of Russian oil from international markets could be much slower than expected and overnight news of a Chinese provincial government entity securing a Russian oil deal is a further bearish. Other negatives include a US request to the Brazilian national oil company to increase production, crude oil in storage in Europe reportedly increased by 1.8%, and a week over week increase in European crude oil inventories of 0.9%.
With several reports indicating China is securing product supply from Russia, record high US retail gas prices and reports that the largest refinery in Vietnam is running at full capacity, fear of global tightening of product stocks is partially deflated. On the other hand, record refinery margins around the world should support crude oil prices and indicate record retail prices have not markedly dented demand. While the massive washout in gasoline severely injured the charts yesterday, significant corrections are not unusual following a compacted 6-day rally in RBOB of $0.37, especially with gasoline from the mid-March low to the May high posting a massive rally of $1.00.
NATURAL GAS
While the Russian national gas company Gazprom yesterday indicated they will meet all obligations to gas buyers in Europe, Ukraine surprised the market with an announcement to suspend Russian gas flows through the Luhansk region in eastern Ukraine. Another fundamental development capable of thickening support at the $6.50 level and providing near term lift is the latest EIA natural gas consumption estimate for May, as the EIA raised May consumption to 85.73 BCF/day from a gain forecast in April of only 84.11 BCF/day.
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.
