Written Commentary
NATURAL GAS
March natural gas prices are trying to stabilize yesterday’s weak performance and enter the US trading hours fractionally higher. This comes as the market finished lower for the sixth consecutive session yesterday and into a new low for the decline. The market remains hamstrung by weather forecasts calling for warmer temperatures later this month. This view was confirmed by the latest NOAA National Weather Service that forecast heating degree days are 20% below the seasonal average into February 17. Another negative headwind comes on reports of a growing backlog of utility power generation sources expected this year. The natural gas market is technically oversold and vulnerable to short-covering rallies without fresh bearish news flow.
CRUDE OIL
March crude oil prices rallied into a new 9-day high this morning, ahead of the latest OPEC monthly report and this morning’s CPI report. The outside market tone is mixed to start with equity market weakness and a softer US dollar. Early support for oil came from ongoing cash market tightness, with near term calendar spreads in backwardation, and a major Wall Street bank raising their price outlook in response to a tighter supply and demand outlook. The bank raised their 2024 demand outlook and reduced non-OPEC supply growth. Geopolitical risks remain, with continued Israeli strikes in the southern border town of Rafah and Houthi militants opening fire on a ship headed to Iran. However, there is chatter that the Israel-Hamas conflict could be moving toward a diplomatic solution. There were weekend talks between Saudi Arabia and Iran’s foreign minister about a political resolution to fighting in Gaza. There was also a report late Monday that senior Israeli officials are planning a trip to Egypt to talk about a ceasefire. In the meantime, world oil production comes into focus ahead of this morning’s OPEC monthly report release. Of particular interest is the demand outlook in the face of Middle East tensions. The trade points to a stronger US economy and recent stimulus measures in China as factors that could bolster demand prospects. However, a pullback in interest rate cut expectations could tamp down the demand outlook.
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.
