Department of Energy reported an increase in crude oil supplies, crude falls sharply on Wednesday

7.21.10 Filed Wednesday 7:30 pm

ALL CHARTS THIS WEEK ARE Daily Bars

Last Last Week

September Crude 76.46 77.28

September Heat 201.78 203.15

September Gas (Blended) 206.49 206.40

Crude oil fell sharply on Wednesday after trading to a three-week high

on Tuesday. The reason for the decline was, in part, due to the

Department of Energy report which indicated an increase in supplies.

Crude stocks increased by 360,000 barrels for the latest reporting week.

Stockpiles for gasoline and distillate fuels, which includes diesel fuel and

heating oil, also increased. Imports of oil also increased by 7.5% to 9.98

million barrels a day. This is the greatest increase in imports since

April. Also, comments by Federal Reserve Chairman Bernanke who

indicated that sluggish economic conditions currently being experienced

in the US would continue for some protracted time also helped to set a

bearish tone for the complex on Wednesday. He referred to the

economic outlook as "unusually uncertain." This weaker than expected

appraisal led to a decline in the stock market and with it a decline in the

oil market. Supplies of crude oil at Cushing, Oklahoma, which is the

terminus for the benchmark West Texas intermediate crude, rose by

985,000 barrels to 371 million, the highest level since April. Gasoline

stocks were higher by 1.12 million barrels to 222 million barrels for the

latest reporting week. This is the highest stock level since last April.

Distillate stocks rose by 3.94 million barrels to 266 million barrels a day,

the largest increase since last January. Total oil consumption increased

by 3.2%. Demand is up 2.5% from last year but down 7.7% from levels

seen three years ago. Serious storms have yet to develop and threaten

Gulf of Mexico production. The Gulf of Mexico accounts for 31% of

domestic oil production and 10% of natural gas production. Both

volume and open interest has been declining in crude oil. Money flow in

crude oil is negative. Money flow in both products is also negative.

Support Resistance

September Crude 75.00 79.00

September Heat 198.00 208.50

September Gas 202.5 210.00

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METALS

Last Last Week

August Gold 1185.00 1208.70

Sept Silver 17.66 18.325

Oct Platinum 1518.40 1529.80

Gold fell in price on Wednesday to match declines in equities and crude.

The retreat in price gained momentum with the testimony of the Fed

Chairman who wasn’t particularly buoyant about the prospects for

economic growth. Interest rates should continue to remain low for the

foreseeable future but loan demand remains sluggish and inflationary

pressures are non existent. Wage/price pressures are not in play.

Financial deleveraging continues and consumers continue to pay down

debt rather than look to leverage. These conditions lend a soft tone to

the metals market with traders content to buy breaks rather than chase

highs. Money flow for both gold and silver remain positive. Activity has

contracted, however with volume in London falling 16% in June even as

the market was making new highs. 20.8 million ounces traded daily in

June down from 27 million in May. Silver volumes in London fell to 85

million ounces, down from 104 million ounces in May.

Support Resistance

August Gold 1168.00 1205.00

Sept Silver 17.30 17.97

Oct Plat 1485.00 1540.00

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SOFTS

Last Last Week

September Coffee 157.30 162.60

October Sugar 17.47 16.97

Sugar was up 1.6% on Wednesday on demand driven buying. One of

the positive influences in the sugar market was delayed shipments from

Brazil. Yesterday, out of six ports, there was a record delay involving

111 ships. This delay gave the market a feeling of “tightness” in

available supplies.

Support Resistance

September Coffee 155.00 165.50

October Sugar 16.50 18.50

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Last Last Week

Sept Soybeans 9.904 9.572

Sept Corn 3.796 3.842

Sept Wheat 5.882 5.59

Wheat rallied on Wednesday on the idea that global inventories might

be drawn down due to smaller crops. Near draught conditions in Russia

is reducing yield. Floods in Canada have also negatively affected crops.

After several years of rising global supply, some end users do not have

adequate coverage. In percentage terms, wheat enjoyed a double-digit

rally on Wednesday. Meteorologists are also pointing to weather

patterns in the Pacific as forming the early stages of a La Nina system

which could produce warmer, drier weather in key growing regions of

the Midwest and adversely affect winter wheat production.

Corn was up for the first time for the week and soybeans gained as well

on speculation that drier weather is going to damage crops in the US.

This month there has been a significant lack of rain for key growing

regions in Illinois, Indiana and Iowa. 15% of the crop is under stress.

Without sufficient irrigation crops remain vulnerable to heat. Corn is

up 5.4% in July and soybeans are up 8.4%. Crop conditions have

generally gotten worse over the past five weeks. The Midwest received

record rains in June but the weather patterns of July have changed all

of that. Money flow in wheat is negative. Money flow in soybeans and

corn is positive.

Support Resistance

Sept Soybeans 9.71 9.98

Sept Corn 3.68 3.82

Sept Wheat 5.68 6.00

Chuck Kespert from NY/NY