Explore Special Offers & White Papers from ADMIS

Minimal Gains in Gasoline

CRUDE OIL

While the bull camp in crude oil is disappointed given the lack of a definitive price benefit from supportive news overnight from API crude oil inventories and strong Chinese crude oil imports, the bull camp in gasoline should be even more disappointed in this morning’s very minimal gains given its news flow. Perhaps the gasoline market is experiencing significant headwinds from news of a restart of a large Chinese refinery and from the EIA lowering 2023 oil and diesel demand. In fact, the EIA now expects overall energy demand growth to be cut in half from the growth rate seen last year. As in the crude oil trade, the gasoline trade has seen upbeat demand expectations also tempered by last weeks below par implied gasoline demand reading and because of disappointing economic data from the US and China. While the Reuters poll predicts a very modest increase in EIA gasoline stocks this week of only 900,000 barrels, signs that US refiners are ramping up run rates sharp could keep pace with improving seasonal demand and in turn thicken resistance in July gasoline around the $2.60 level. The API survey said that US gasoline stocks had a weekly increase of 2.41 million barrels which was a larger increase than market expectations. As opposed to the gasoline market, we see the diesel market stuck in a much narrower trading range in the coming sessions. However, the diesel market is sitting in the upper portion of the last 30 days trading range and has year-over-year surpluses in both diesel and distillate inventories.

gas pump in car

NATURAL GAS

While we do not expect natural gas prices to forge wide trading ranges as we expect in the petroleum complex, the market has the prospect of expanding seasonal demand due to hot temperatures in portions of the US and Europe. Certainly, there are other supportive supply side issues like the Norwegian outage and Asian LNG prices climbing above a psychologically important top of the range at $9.00. Even though temperature forecasts longer-term favor hot conditions, cooling prospects this weekend and a series rain events temper recent improved demand expectations. In the bears favor, the EIA expects US natural gas production to hit record highs this year. This week’s Reuters poll projects EIA natural gas in storage to increase by 110 to 119 BCF. Pushed into the market, we favor the downward track as bullish weather in the US has moderated in the short-term or will moderate into this weekend, the overall global economic tone is soft and US supply in the Thursday report is expected to build.

 

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