Written Commentary
by Stephen Platt and Mike McElroy
Price Overview
The petroleum complex saw some retrenchment over the last two sessions, with May crude oil trading as low as 108.68 before ending the week at 113.90. Products also experienced a pullback, with the heating oil leading the losses due to a decision by European leaders to delay any action against Russian energy imports at this time. Indications that Kazakhstan’s CPC pipeline could see the return of a portion of its capacity in the coming days eased upside pressure seen early in the week after storm damage knocked out its 1.2 mb/d in crude flows.
Additional weakness emanated from positive comments out of the US Administration regarding the Iran nuclear negotiations, talk of additional global SPR releases, and the technically overbought condition of the market that initiated some profit taking. Reports at mid-day of attacks on Saudi Aramco oil facilities in Jeddah by Houthi rebels helped erase most of the day’s losses into the close.
The performance of the market late in the session is a reminder that despite a mix of negative news, the war in Ukraine rages on against a backdrop of tight global supplies that were an issue even before the Russian attack. The market looks set to test the 120 on the upside, with the first level of support coming in the 110 area.
Natural Gas
Prices continued there unabated push higher as the May contract followed up yesterday’s 17 cent gain with a jump of 16 ½ cents today to end the week at 5.611. Production has become a growing concern as it hovers near 94 bcf/d. The storage report yesterday indicated a draw of 51 bcf, bringing total stocks to 1,389 bcf, over 17 percent below the 5 year average. With production not budging, prices are starting to reflect concerns regarding producers ability to rebuild stocks to a comforable level this summer, especially with all signs pointing to maxed-out LNG exports for the forseeable future. Indications from President Biden during his European trip that the US could be fast tracking apporvals for projects that would increase capacity added to the overall positive tone. The market is close to bumping into trendline resistance in the 5.65 area, and beyond that you have to look to a weekly chart for a target, which looks like the October highs near 6.50. The speed of the rally increases the potential for a severe retrenchment when it occurs, with the 5.20 level as initial support.
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.
