Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
The market saw back and forth action today as the crude ended with a loss of $1.15 and the products managed small gains. Weakness was initiated by the API report late yesterday that showed an unexpected build in crude stocks, which was confirmed in the DOE release today. Reports that Chinese imports had dropped in April to the lowest level in three months added to the selling pressure. Support was offered by Canadian wildfires that have shut-in production of crude and gas, as well as news that Russian exports had reached a twelve-month high.
The DOE report showed crude oil stocks rising by 3 mb, in sharp contrast to expectations for a decrease near .9, while the SPR decreased by 2.9. Product stocks experienced larger drawdowns than expected, with gasoline off 3.2 mb and distillates down 4.2. Total stocks of crude and products saw another small increase this week of .5. Gasoline disappearance showed improvement, jumping to 9.3 mb from 8.6 last week and could be seen as a clue for summer demand. Refinery utilization gained .3 to 91 percent.
For the moment the market looks to have run out of steam after retracing 50 percent of the break since mid-April. The 74 level offers near term resistance, with a settlement above there opening the chance for a test of the 76.75-77.00 range. The close back below the 9-day moving average is a near term negative with 71.00 the next level of support.
Natural Gas
Prices squeezed out additional upside action yesterday before pulling back today, with the June contract losing 7.6 cents to settle at 2.191. A drop in imports from Canada helped push prices higher, as extensive wildfires have shut-in production and caused inconsistent pipeline flows South, with exports to the US dropping by as much as 1.5 bcf/d at times this week. Maintenance of LNG facilities continues to constrain exports and add a negative bias, but production has also seen maintenance increases, with output dipping below 101 bcf today and possibly offering support in the coming days. Tomorrow’s storage estimates point to a build of 76 bcf compared to the 5-year average increase of 87. The market has flirted with the 9-day moving average, settling above it yesterday but failing to maintain that level today. Support is in the 2.07-2.10 range and then at the contract low of 2.031. Resistance comes in near 2.22 and then at 2.315.
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.
