Crude falls sharply after a Department of Energy report stating that there was a considerable surge in supplies of product

06.23.10 Filed Wednesday 6:50 pm

ALL CHARTS THIS WEEK ARE Daily Bars

Last Last Week

August Crude 75.75 78.58

August Heat 207.23 212.65

August Gas (Blended) 206.95 213.71

Crude oil fell sharply on Wednesday after a Department of Energy

report showed that there was a considerable surge in supplies of

product. For the latest reporting week, crude stocks rose by 2 million

barrels to 365 million barrels. The trade was looking for a decline in

stocks by 800,000 barrels. Another negative was a sharp drop in new

home sales, a record low after the expiration of a tax credit for new

buyers. The 33% drop in new sales suggests a slowing US economy, an

implied drop in consumer confidence and with it, a drop in the demand

for oil. Going into the Federal Open Market Committee Meeting, crude

oil was lower by 1.45%, Heating Oil was off by 1.53% and gasoline was

lower by 1.68%. The Fed did leave rates unchanged and mentioned the

economic conditions in Europe as possibly having an adverse impact on

US economic growth. Also, the decision by the Chinese to let their

currency float might result in higher costs of imported Chinese goods

and this would consequently have a negative impact on US corporate

profits. Additionally, the International Energy Agency stated that

annual demand growth rates will contract each year between now and

2015. Chinese oil demand will continue to grow but at a slower pace.

The decline in consumption in developed countries should accelerate.

Money flow in crude is negative as it is in gasoline. Money flow in

Heating Oil is positive.

Support Resistance

August Crude 74.50 79.60

August Heat 205.00 217.00

August Gas 203.50 216.00

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METALS

Last Last Week

August Gold 1237.50 1231.80

July Silver 18.505 18.485

July Platinum 1570.00 15712.0

Gold has been marking time since last week at this time after making a

new nominal high at 1266.50 on Monday. Gold has subsequently been

under profit taking pressure in front of the Federal Reserve’s Open

Market Committee meeting. Gold is still being viewed as a currency

alternative and the recent short covering in the EC from multi month

lows was a gold market negative. Now that short covering and

rebalancing the EC seems to be over, this should prove to be a gold

market positive. Gold is also still being viewed as a hedge against wealth

erosion. On Tuesday, gold linked with equities and followed them lower

in a broad based selloff. The Federal Reserve maintained its interest

rate policy and this is a gold market positive as well. Silver has linked

with copper as an industrial metal and this is a negative for that market.

Money flow in gold remains positive. Money flow in silver remains

negative.

Support Resistance

August Gold 1220.00 1256.00

July Silver 18.05 19.22

July Plat 1525.00 1598.00

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SOFTS

Last Last Week

July Coffee 160.50 158.65

July Sugar 15.71 15.95

Sugar ground lower for the second day in a row as economic releases

suggested the potential for economic contraction. The market has been

tracking energy and equity values and those sectors have been under

pressure lately. Cash market sugar business continues to be brisk,

however.

Support Resistance

July Coffee 155.00 167.00

July Sugar 15.25 16.25

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Last Last Week

July Soybeans 9.58 9.576

July Corn 3.464 3.562

July Wheat 4.622 4.612

Soybeans and corn were defensive yesterday as signs of economic

contraction resurfaced with a sharp drop in activity in the housing

sector. Grains were also under pressure as warmer than seasonal

weather in the key growing areas in the Midwest United States is aiding

crop development. India is said to be expanding soybean planting as

well. In China, growing weather may be too dry and could be stressing

crops there. In turn, this may increase their purchases. The US corn

crop is scheduled to expand to a record 339 million tons. This should

bump up global stockpiles to 147 million tons up from 143 million tons

last year.

Support Resistance

July Soybeans 9.45 9.74

July Corn 3.44 3.60

July Wheat 4.50 4.85

Chuck Kespert from NY/NY