The petroleum complex traded in a mixed fashion with early gains linked to rising tension in the Mid East attracting profit taking as weakness to product markets appeared to undercut early gains.
Early support to values was apparent in response to air attacks by a Saudi led coalition against military targets in Yemen following reports Iran had claimed responsibility for drone attacks on Saudi pumping stations this week. With ternsions high following the US deployment of additional military assets this week into the area the prospects that supply might be threatened appeared to linit strong selling interest in crude. Some caution on the long side was also apparent despite the heightened geo-political tension on reports that Trump was reluctant to get into a military confrontation with Iran along with a meeting of the OPEC monitoring committee this weekend followed by a full ministerial meeting scheduled for next weekend.
With trade concerns remaining in the background as a drag on economic growth pressure on gasoline and diesel was apparent on fears demand might suffer particulalrly if prices remain high and discourage consumption.
Overall the choppy price action apparent today still suggest a trading range still appears to be in place as fears of economic slowing are counterbalanced by supply and geopolitical concerns in the Middle East. Until these issues are resolved we expect a choppy trading range will evolve in the prompt month crude near the 60.00-65.50 area until the effectiveness of the sanctions can be assessed, the output levels from OPEC are determined for the 2nd half of the year, and the OPEC meeting on June 25-26th takes place.
Values traded in a rather steady fashion with values hard pressed to rally amidst forecasts for warmer temperatures and a weakening in demand at a time when production is near record high levels. With stocks expected to continue building by 104 bcf for the week of May 17 compared to 106 bcf in the prior week and compared to 88 bcf for the five year average concerns over low stock levels appear to have been pushed into the background. Setbacks should attract support near 2.58 on improving exports of LNG and slightly lower production as we head in to the summer months and resistance near 2.67.
Charts Courtesy of DTN Prophet X
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 views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. 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 ADMIS position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to. The authors of this piece currently maintain positions in the commodities mentioned within this report. Charts Courtesy of DTN Prophet X, EIA.
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