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Energy Brief Sep 17

Price Overview

The market took a step back over the last two sessions as the November crude oil settled 55 cents lower today at 71.82.  With 28 percent of production now shut-in, the market may be seeing some light at the end of the tunnel for supplies.  This likely flushed out some profit taking into the weekend aided by strength to the dollar and concerns about recent signs of slowing in the Chinese economy.  

Despite the pullback, the market gained over 3 dollars on the week.  The main supporting factor has been the supply disruptions in the Gulf after Hurricane Ida and Nicholas.  Underlying support continues to emanate from the large recent stock drawdowns, which have been exacerbated by the storms and look likely to continue next week as the recovery process winds down in the Gulf.  Both the IEA and OPEC are predicting substantial global demand growth in the fourth quarter as vaccination rates increase and begin to lead to improved infection numbers.   

With multiple disturbances ruminating in the topics, trade remains jittery heading into the weekend.  With the 71.00 level holding up today, the market looks poised to probe higher, with 73.50 the next area of resistance.

Natural Gas

The market has run out of steam for the moment as intraday prices recoiled nearly 60 cents from the highs seen on Wednesday.  The active November contract settled at 5.146 today, down nearly 24 cents.  The wind came out of the sails yesterday when the weekly storage report indicated a build of 83 bcf, which was above estimates near 76.  Helping the pullback was a drop in overseas prices after weeks of strength, along with a fourth day of lower LNG flows stemming from the shut-in of Sabine Pass due to power issues from Hurricane Nicholas.  Approximately 40 percent of GOM production remains offline, which is offering underlying support.  As output continues to recover, further weakness could lead to a test of the 5.00 area, with a 38 percent retracement of the rally since mid-August just below there at 4.98.  Initial resistance likely crops up in the 5.25 area.

Charts Courtesy of DTN Prophet X, EIA, Reuters


The authors of this piece do currently maintain positions in the commodities mentioned within this report.

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.

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