Natural gas and heating oil under pressure due to oil inventories news last week

07.23.09

Filed 10:35 am Thursday      

                                                       Last                                            Last Week   

Sept Crude                                   65.05                                               62.58

Sept Heat                                      174.03                                           161.72

Sept XRB (Blended Gas)             183.00                                           169.94

Crude oil was under pressure on Thursday morning on a concern over increased supplies and also in response to an increase in US weekly jobless claims. The market did attempt to rally as existing housing sales came in better than expected. Gasoline and heating oil inventories rose last week, the sixth consecutive increase. Crude oil supplies fell however according to the US Department of Energy. Demand continues to be weak. Crude in storage is at the highest level it's ever been. In terms of pricing, the market is factoring in an economic recovery for the second half of the year. Many analysts don't see that on the horizon, however. While China continues to stockpile commodities such as copper and oil, Japan's imports fell 19% in June. Japanese refiners and utilities have cut output. Many market observers believe that the price of crude is not truly and accurately reflective of supply and demand considerations. They believe that the oil complex has become something more than just the oil complex. It has been elevated to an asset class and given the same consideration as stocks and bonds by money managers. If this consideration of being an asset class were removed from the oil complex is believed that crude oil be trading around $45 rather than the current level of $65. One of the favorite plays of those with very deep pockets is to buy crude oil, store it and sell differed futures contracts against it many months out. Even given the storage costs, this trade locks in a near double digits return.

According to the US energy Department, crude stocks dropped 1.8 million barrels to 242 million barrels. This was less than an expected decline of 2.1 million barrels. Gasoline supplies climbed to 813,000 barrels to 215 million barrels, and the highest level since the middle of April.

Another factor to crude oil trading has been a direct link to the US stock market. If stocks rally, the path of least resistance is higher. If stocks decline, crude oil more often than not loses value as well.

 

                                                             Support                                     Resistance

Sept Crude                                             62.90                                               67.00 

Sept Heat                                               168.00                                            178.00

Sept Gas                                                172.50                                            186.00                                                                

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METALS

                                                                     Last                                              Last Week     

Aug Gold                                                 952.80                                              938.90

Sept Silver                                               13.71                                                  13.26              

Oct Platinum                                           1178.30                                          1164.50

After trading higher in the beginning of the week, the gold market drifted through testimony of Federal Reserve Chairman Bernanke on Capitol Hill. This testimony was balanced, not particularly optimistic nor pessimistic and really didn't give traders much to work with in terms of developing a theme to trade against. Short-term interest rates have backed up a little bit which is a market negative while the stock market has remained positive. The dollar has been consecutively weaker and stronger against major trading pairs. Also, volume has been very light. Trading in December futures has been very choppy, all over the place. October platinum is even worse in terms of trading continuity. Part of this can be attributed to the time of year but another consideration is a lack of consensus regarding economic strength or weakness going forward.

                                                             Support                                      Resistance

Aug Gold                                             940.00                                           960.00

Sept Silver                                            13.19                                          14.00                

Oct Plat                                               1150.00                                       1197.00

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SOFTS

                                                                       Last                                     Last Week

Sept Coffee                                                 121.60                                     118.85

Oct Sugar                                                     18.09                                    17.77

Sugar rallied on Thursday to a one week high as traders  believe that reduced supplies would not be enough to satisfy demand. Indian production seems to have declined and when thrown into the mix of world production, many are looking for a world production deficit. Production in Brazil has slowed due to excessive rains. India has turned into a net buyer of sugar. Because of that, exports are expected decline 40%.

 

Coffee continues to trade higher despite the fear that demand is slack.

                                                          Support                                   Resistance

Sept Coffee                                                    113.00                                     126.00

Oct Sugar                                          17.55                                        18.25

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                                                                  Last                                    Last Week

Nov Soybeans                                          9.162                                       9.044

Sept Corn                                                 3.164                                        3.294      

Sept Wheat                                               5.256                                       5.346

Soybeans continue to edge higher. Dry soil in the Midwest is a price positive. In key growing regions, rainfall is 25% less than normal. The top 18 soybean growing states, 44% of the plants have flowered compared with 62% which is the five year average.

 

Corn continues to trade under pressure due to a bumper sized crop. There is a fear that the US Department of Agriculture may lower its production estimates after Argentina, the world second-largest exporter, saw its production drop by 40%. Also the USDA is still estimating the impact of cold wet weather that delayed planting. Still supplies will be more than adequate to meet demand.

 

Wheat also traded lower, to its worst levels in two weeks on the idea that the Kansas winter crop will be greater than expected. Also, potential trading restrictions in wheat trading acted as a negative for price.  

 

                                            Support                                    Resistance

Nov Soybeans                                          8.897                                        9.23

Sept Corn                                                2.994                                        3.17

Sept Wheat                                              5.05                                         5.41

Chuck Kespert

NY/NY

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.