Crude rallies more than 2% on Wednesday sparked by the release of the Department of Energy rerpot

04.14.10 Filed Wednesday 7:45 pm

ALL CHARTS THIS WEEK ARE Daily Bars

Last Last Week

June Crude 86.93 86.51

May Heat 224.21 224.39

May Gas (Blended) 233.27 231.47

Crude oil rallied more than 2% Wednesday sparked by the release of

the Department of Energy report. The DOE stated that crude stocks

actually declined for the first time in over two months. There was also a

drawdown in gasoline stocks. Also, oil imports were lower than last

week; a positive because it helps cut into the glut overhanging the

market. The DOE stated that crude stocks dropped by 2.2 million

barrels for the latest reporting week. The trade had been looking for an

increase of 1.6 million barrels. During this crossover period as refineries

retool to produce more gasoline, crude stocks traditionally increase.

Crude stocks had increased for nine straight weeks. Speculative and

momentum traders really don't care too much about the overall larger

picture however. Trading crude oil has been heavy recently with 1.4

million contracts changing hands on Tuesday and 1.1 million contracts

changing hands this past Friday. Crude oil stockpiles remain 5.1%

higher than the five-year average. Gasoline consumption has increased

to 9.14 million barrels a day, the highest level since last October.

Against this, just the night before, the American Petroleum Institute

stated that crude stocks actually rose by 1.4 million barrels. The API

which is an industry organization and the DOE which of course is

governmental are seldom in complete agreement. Another positive for

the oil sector was the continuing rally in the stock market. Strength in

oil and stocks seem to go hand-in-hand these days. It's the new

paradigm. Another positive for the market is the continuing low level of

interest rates. Money flow in crude oil remains negative, however.

Support Resistance

June Crude 85.00 87.50

May Heat 221.00 229.00

May Gas 220.00 230.00

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METALS

Last Last Week

June Gold 1156.20 1153.00

May Silver 18.455 18.199

July Platinum 1734.20 1723.20

Gold rallied on Wednesday as dollar weakness and a general positive

tone in many other correlated markets created a buying atmosphere.

Continuing signs of a modest global economic recovery has expressed

itself as better demand on the buy side of commodities. Gold is up 5.8%

for the year. The rally on Wednesday was against a decline of 0.8% on

Tuesday. Money flow in silver remains positive. Palladium is trading at

a two-year high. Some market observers believe that Palladium demand

will outstrip production for the next decade as Russia draws down

supplies without adequately replacing them.

Support Resistance

June Gold 1140.00 1165.00

May Silver 17.80 18.70

July Plat 1680.00 1740.00

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SOFTS

Last Last Week

May Coffee 131.85 137.55

May Sugar 17.53 16.16

Coffee is expected to trade sideways between $1.28 and $1.38 over the

foreseeable future until traders get a better idea about the potential and

the reality of the Brazilian crop.

Sugar continued to rally over the last five sessions as traders continued

to speculate that supply will not be able to meet demand. Sugar had

plunged in price by 40% since the beginning of February after reaching

a 20 year high. Traders continue to believe that there will be a scarcity

in the cash market. Last year there was a “perfect storm” for sugar as

there was a scarcity of rain in India and too much rain in Brazil

damaging both crops severely. Many traders now think that the free fall

in sugar is over and that any future declines will be met with buying

interest.

Support Resistance

May Coffee 130.00 135.50

May Sugar 16.20 18.00

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Last Last Week

May Soybeans 9.69 9.524

May Corn 3.580 3.564

May Wheat 4.746 4.752

Money flow in soybeans continues to be positive. Soybeans reached a

seven week high as traders believe a trade dispute between China and

Argentina will continue. China has drastically curtailed importing

soybeans from Argentina as a trade war between the two countries

continues. This skirmish benefits US soybeans. Soybean and soyoil

purchases by China account for more than half the world imports of

both soybeans and oilseed. They're expected to reach a record high of

about 45 million tons this coming year.

Money flow in corn is also positive. Corn rallied to a three-week high on

the belief that China will continue to increase imports in an attempt to

reduce domestic prices. The price for corn in China, locally grown,

reached 20 month high last week. China does not want to see price

inflation when it comes to the price of grains. China already has a

problem with surging prices in real estate. To combat the price

pressures in corn they are selling reserves.

Money flow in wheat is negative, however. The dry weather in key

growing areas in the US should allow farmers to get an early start on

planting wheat this spring. It's 70° in North Dakota. This will allow

planting to occur up to two weeks earlier than normal. A faster start

will probably result in a bigger crop. Winter wheat accounts for 70% of

the crop over the course of the year while spring wheat accounts for the

remainder.

Support Resistance

May Soybeans 9.46 9.82

May Corn 3.42 3.72

May Wheat 4.59 4.85

Chuck Kespert

NY/NY