The petroleum complex attracted buying interest on renewed concern over global supply risks. Reports that Canadian Syncrude won’t return to full production as quickly as previously expected along with ongoing concern over the security of Red Sea shipments off of the coast of Yemen attracted buying interest into nearby crude and to a lesser extent products. In the background remains the potential for lower Iranian export levels following news that India’s import levels had fallen by 12 percent in June compared to the prior month. In other news OPEC production was reported to have risen to a 2018 high of 32.64 mb/d. The higher levels have helped push compliance rate down to 111 percent from 116 percent in June as Saudi Arabia, Kuwait and the UAE increase production. OPEC still appears to be producing as much as 460 tb/d below target as Venezuela, Libya and Iran remain below quota.
Nervousness over the supply situation has offset selling linked to concern over the Chinese economic situation and ideas it will lead to a reduction in crude oil demand. Nevertheless the worries have been pushed into the background as supply disruptions remain in focus. Whether Saudi Arabia and Russia can make up for the shortfall remains a key question for the market. In addition the possibility that OECD countries might use strategic reserves to offset the supply shortfall is a key consideration given the potential for higher oil prices derailing the economic recovery in the US.
In products, the return to operation of key refineries along the Gulf coast following maintenance appeared to play a role in weakening the cracks, with the gasoline crack taking back most of what it had gained Friday. Further weakness might ensue if demand begins to show signs of weakening and export levels contract.
Prices traded mostly steady, reflecting high usage rates in the near term along with forecasts for below normal temperatures in mid to late August for the mid-Atlantic states and Southeast. The more moderate temperatures longer term should inject caution into the market on the upside as we approach the end of summer and lower cooling needs. Estimates for this week’s EIA report are for stocks to build by 51 bcf compared to 18 last year and 43 bcf on the five year average. Values are likely to continue finding resistance near the 2.80 level basis September, but with stocks near 20 percent below the five year average, any breakdown should be limited as storage ahead of winter picks up.
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.
Contact Us Today
Get free guides and special offers in the Resource Center.
© 2018 Archer Financial Services, Inc.
This is not a solicitation of any order to buy or sell, but merely a collection of information related to Archer Financial services and commodities trading provided by Archer Financial services. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor do they purport to be complete. No responsibility is assumed with respect to any such element, nor with respect to any expression of opinion herein contained.
The risk of loss in trading futures and options on futures can be substantial. Each investor must carefully consider whether this type of investment is appropriate for them. Past performance is not necessarily indicative of future results.