Explore Special Offers & White Papers from ADMIS

Nat Gas Corrective Bounce Reverses

NATURAL GAS

Clearly, the corrective bounce from last week has been aggressively reversed, with European and US weather patently bearish and a (+22%) massive surplus to five-year average storage levels in the US likely set to result in fresh contract lows. In fact, the natural gas market retains last week’s short at 117,000 contracts compared to the net spec and fund short of 150,000 contracts one year ago indicating the market is not mostly sold out yet. In a longer-term supportive development Bloomberg overnight indicated Chinese LNG import capacity is expected to rise sharply this year and is expected to reach 170 million tons per year. Furthermore, local Chinese city gas distributors have started purchasing LNG outside of normal government channels.

stove flame blue and red

CRUDE OIL

With a negative technical trade to end last week’s action, followed up by negative technical action early today, the bull camp is lucky to have had improving energy demand expectations surface last week, especially with classic supply fundamentals in the US pointing to a rebuilding of crude oil inventories. However, the liquidation bias should be mitigated by a 7.5% decline in global crude oil in floating storage with inventories this week reaching the lowest since October. Furthermore, this week’s floating storage readings showed Asian Pacific stocks down 3.6% and US Gulf Coast down 84%! Another supportive signal from the weekly global crude in floating storage estimate is a large buildup of supply in the Middle East as supplies back up from the terrorist threat in the Red Sea. On the other hand, we expect this week’s EIA report will show US production returning to record levels from the severe cold disruptions, and with nearly 20% of US refinery capacity idled, we suspect EIA crude oil stocks will continue to build. However, in a strange anomaly, a pattern of four straight weekly builds in EIA crude storage has resulted in an expansion of the year-over-year deficit to 36 million barrels.

 

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