Crude falls sharply again on Wednesday after the release of the Department of Energy report

05.12 Filed Wednesday 5:45 pm

ALL CHARTS THIS WEEK ARE Daily Bars

Last Last Week

June Crude 75.65 79.97

June Heat 215.91 218.45

June Gas (Blended) 221.04 221.75

Crude oil fell fairly sharply in price on Wednesday after the release of

the Department of Energy report detailing weekly supply and demand.

Crude stocks rose by 1.95 million barrels to 362 million barrels. The

storage hub for West Texas Intermediate at Cushing, Oklahoma, the

benchmark for New York Mercantile Exchange oil, rose to record

levels. This really depressed front month futures as June traded nearly

$4.50 under July futures. These spreads suggest deep pocket traders

are buying crude. Storing it and selling deferred contracts. Gas stocks

were lower by 2.8 million barrels to 222 million barrels. Traders were

looking for supplies to have increased to 400,000 barrels. Gasoline

broke ranks with the crude and traded higher on the session. Heating

oil was also better. A negative for the complex was the continuing

strength of the dollar. With the ongoing concern about the Greek debt

crisis, the dollar has steadily increased in value as a safe haven play.

Another negative was spread traders buying gold and selling crude. If

austerity measures are adopted by Greece as part of its bailout package,

many observers see the Euro zone entering into an economic

contraction and consequently the off-take of oil would be reduced.

Another negative was the reduction in oil demand as projected by the

IEA by 220,000 barrels a day to 86 million barrels a day. Iran is

rumored to be storing as much as 38 million barrels at sea. Money flow

in crude oil remains negative.

Support Resistance

June Crude 74.00 78.00

June Heat 207.50 218.00

June Gas 213.00 224.00

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METALS

Last Last Week

June Gold 1243.10 1175.50

July Silver 19.663 17.495

July Platinum 1747.30 1649.60

Gold continued to climb higher this week as traders and investors

looked at the metal as the last reserve currency. The only selling

pressure on the metal came with the precipitous drop in the equities

market of a 1000 Dow points and traders sold many of their exposures

to get to cash. Gold priced in Euros moved to an all time high.

Spreaders continue to sell Euros and buy gold. Spreaders are also

selling crude and buying gold against it. Gold is the currency of first or

maybe last resort, depending how you look at it. The EC is down 12%

on the year with many forecasters calling for further deterioration in

price. Gold has been forecast to attempt the 1500 level by September.

Certainly recent gyrations in the US equity market have shaken

investor confidence in the mechanism itself. Gold is up 13% for the

year. The EC problem seems at some level intractable. It’s debatable

that the northern countries will be whole heartedly motivated to bail out

the Mediterranean countries. Gold is overbought however. Gold does

pay attention to its RSI and the current reading is above 70 which

suggests a modest selloff to relieve buying pressure.

Support Resistance

June Gold 1185.00 1255.00

July Silver 18.00 20.05

July Plat 1665.00 1800.00

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SOFTS

Last Last Week

July Coffee 136.85 137.25

July Sugar 14.67 14.29

Coffee traded to its best level in a week as Brazil’s crop may not be as

robust as previously thought. The current production expectation is for

47 million bags, below previous trade estimates. Coffee is better by

6.3% for the year.

Sugar finally showed some buying interest after trading to a 13 month

low. Interest in the cash market picked up at these lower levels,

particularly from Pakistan. West African buying was also observed.

Support Resistance

July Coffee 133.00 138.50

July Sugar 13.50 15.25

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Last Last Week

July Soybeans 9.654 9.78

July Corn 3.782 3.73

July Wheat 4.914 5.12

Soybeans came under selling pressure on the belief that both China and

the US will plant their crops early in the year and yields will be better

than previously thought because of it. Warmer, drier weather will

return to key growing areas in the Midwest US next week. Money flow

in soybeans remains positive, however.

Money flow in corn remains positive. Futures traded to a two month

high. China came into the cash market and bought 300,000 metric tons

of US corn and this gave good tone to the market. There is further

speculation of more Chinese buying. Corn had dropped by 9% for the

year based on the idea of a bumper crop.

Money flow in wheat is negative. The price had rallied in sympathy with

the Chinese buying of corn but producers used the higher levels as an

opportunity to sell and set hedges. The impetus behind the advance was

attributed to short covering rather than fresh buying. Expect lower

values for wheat over the next five sessions.

Support Resistance

July Soybeans 9.47 9.78

July Corn 3.61 3.86

July Wheat 4.84 5.24

Chuck Kespert

NY/NY