Crude Oil market trading at 14 months highs, U.S. temperatures should remain below normal at least through January 15

Weekly Futures Report

01.06.10

Filed Tuesday 3:30 pm

ALL CHARTS THIS WEEK ARE Daily Bars

Last Last Week (12.30)

Mar Crude 83.78 80.03

Mar Heat 221.20 212.78

Mar XRB (Blended Gas) 215.20 207.38

Crude oil continued to trade higher as 2010 got underway. The oil

market was trading at 14 month highs at the beginning of the week.

Winter is only 17 days old and temperatures have been below normal 12

of those days in most populous areas of the US. Temperatures should

remain below normal at least through January 15. On Tuesday evening

the American Petroleum Institute stated that crude stocks were lower

by 2.7 million barrels for the latest reporting week. The eastern half of

the United States is experiencing its coldest winter since 1982. Distillate

stocks increased by 962,000 barrels according to the American

petroleum Institute. Data from the American Petroleum Institute and

the Department of Energy are usually in agreement 76% of the time.

There was a surprise on Wednesday with the release of the Department

of Energy figures. The DOE stated for the latest reporting week that

crude stocks had increased by 1.3 million barrels. The trade had been

looking for a drawdown in crude stocks of 1 million barrels. As for

gasoline, there was a build in stocks of 3.4 million barrels while the

trade had been looking for increase of only 800,000 barrels. Distillates

stocks were drawn down by 233,000 barrels while the trade was looking

for a much greater drawdown of 1.8 million barrels. Of course the trade

was looking for a pop in the numbers and some were caught on the

wrong side of the market. Floor sources now are looking for February

crude to challenge the $80 level for the next technical test. After an early

spike to lower values, crude oil turned higher again and traded as high

as $83 for front month February futures by midday Wednesday as the

belief continues that the current weather pattern will eventually result

in a drawdown in stocks.

Support Resistance

Mar Crude 80.00 85.50

Mar Heat 217.0 225.50

Mar Gas 210.00 220.00

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METALS

Last Last Week 12.30

Feb Gold 1139.60 1092.50

Mar Silver 18.21 16.80

April Platinum 1561.00 1463.30

Gold traded higher going into the New Year. Traders believe that

borrowing costs will remain low and that this will depress the dollar.

The truth is that the cost of money has actually been increasing over the

past week with the yield on the 10 year note trading above 3.8% by mid

day Wednesday. The consensus of traders believes that short-term rates

will continue to trend lower however. Of course much will be

determined by Friday's jobless report. A better than expected jobless

report at the beginning of December inspired a dollar rally and gold

saw widespread profit taking going into year end because of it. Money

flow in gold remains negative however while money flow in silver

remains positive. Also, the dollar was mixed against major foreign

currencies with the Yen negative, the Swiss positive, EC negative, the

British pound negative and the Canadian and Australian, the

commodity currencies, positive against the US dollar. Copper and

platinum has technical breakouts and this supported the gold and silver

in sympathy.

Support Resistance

Feb Gold 1110.00 1145.00

Mar Silver 17.55 18.50

April Plat 1510.00 1585.00

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SOFTS

Last Last Week 12.30

Mar Coffee 141.50 136.65

Mar Sugar 28.38 26.96

Coffee rose in price going into the New Year to reflect general buoyancy

in commodity assets. Coffee production in Brazil is expected to rise this

year between 48 to 50 million bags however.

Sugar rose for its fifth consecutive session to its highest level in 20 years

on the idea that the global shortfall will sustain prices and not damage

demand. India, the world's largest consumer of sugar, continues to buy

this market after the worst monsoon season since 1972. Prices are

expected to remain firm for the next 6 to 8 months. Current supplies of

sugar stocks usually are enough to cover three months of demand are

down to one months of coverage.

Support Resistance

Mar Coffee 139.00 143.70

Mar Sugar 26.50 29.50

*****************************************

Last Last Week 12.30

Mar Soybeans 10.59 10.44

Mar Corn 4.216 4.136

Mar Wheat 5.672 5.446

Soybeans and corn traded higher going into the beginning of the New

Year as unseasonably cold temperatures in the Midwest United States

increased demand for animal feed. A negative consideration for the

complex was that an increase rains in Brazil and Argentina should

increase soybean production in those countries. Brazil is the secondlargest

producer of soybeans in the world. The change in weather

should increase their crop size by 5%. The current weather pattern

there has been termed ideal by market observers and because of that

rallies for US corn and soybean should be limited.

Demand for US wheat also increased due to very low temperatures as

farmers need to feed their animals so they can generate enough internal

heat to combat the cold. Certain weather forecasters have predicted a

subzero temperatures. Wheat was up healthy eight cents midday on

Wednesday basis March futures.

Support Resistance

Mar Soybeans 10.445 10.75

Mar Corn 4.13 4.25

Mar Wheat 5.46 5.75

Chuck Kespert

NY/NY