Crude oil sells off sharply on Wednesday after Depart of Energy report showed an unexpected gain in US inventories

07.29.09

Filed 6:58 Wednesday      

                                                            Last                                            Last Week   

Sept Crude                                        63.35                                              65.05

Sept Heat                                          169.58                                           174.32

Sept XRB (Blended Gas)               182.01                                            183.00

Crude oil and its products fell sharply on Wednesday, the most in three months after the Department of Energy report showed an unexpected gain in US inventories. Market observers had been expecting a draw or a decline in crude stocks of 1.5 million barrels. Instead, there was an increase in supplies of 5 million barrels. Also distillates were forecast to have risen by 1 million barrels and they came in the post 2 million barrels. The increase in crude stocks was the biggest weekly increase since April. There's just too much supply of crude oil and not enough demand to justify higher prices. Crude oil is up 43% for the year. Crude oil imports were higher by 8.9% to 10 million barrels a day last week, the highest level since January. Refineries operated at 84.6% of capacity due to slack demand. Another negative was a weak reading for durable goods orders. Another feature to the complex was a stronger dollar against most major foreign currencies. Another negative for the complex was a weaker than expected consumer confidence reading.  Due to excess capacity and very weak demand crude oil could fall to $60 for the front trading month.

 

                                                             Support                                     Resistance

Sept Crude                                             61.00                                               67.00 

Sept Heat                                               167.00                                            178.00

Sept Gas                                                172.50                                            188.00                                                                

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METALS

                                                                     Last                                              Last Week     

Aug Gold                                                   929.6                                              952.80

Sept Silver                                                  13.285                                             13.71              

Oct Platinum                                              1172.2                                         1178.30

In sympathy with the fall in the price of rude oil, gold fell in price as well. A stronger dollar help push gold prices lower as the dollar index climbed in value for the second consecutive day. Gold was down over $9.50 for the nearby trading month. One of the negatives for the complex was a decline in consumer confidence. Other than that, some other economic figures offered support including numbers released for the US housing market. But unemployment in the United States continues to rise and this is a negative factor. As home prices have declined, people just don’t feel as wealthy as they once did and are not eager to spend discretionary income. Another feature to the market was the circulation of a story that the stockpile buying of copper by China may be coming to an end. Inventories of copper at the London metals exchange increased for the second consecutive week.

 

                                                             Support                                      Resistance

Aug Gold                                             910.00                                           952.00

Sept Silver                                            13.00                                          14.00                

Oct Plat                                               1150.00                                       1197.00

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SOFTS

                                                                       Last                                     Last Week

Sept Coffee                                                  122.85                                    121.60

Oct Sugar                                                     18.56                                       18.09

Sugar is expected to rally to 28 year highs over the next several months. The continuing shortfall in production in India is the main reason. Previously, India had been an exporter of sugar. Now it is a net importer. Some analysts are looking for $.25 a pound. The deficit for the coming year is expected to reach 6 to 7 million metric tons. Sugar traded at a three year high yesterday in New York. In addition to India, Mexico, Thailand and Pakistan have all seen production reductions.

 

                                                          Support                                   Resistance

Sept Coffee                                                    117.00                                     129.00

Oct Sugar                                          17.90                                        18.80

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                                                                  Last                                    Last Week

Nov Soybeans                                       9.16                                              9.162

Sept Corn                                              3.206                                           3.164      

Sept Wheat                                            5.114                                          5.256

Corn and soybeans have been under selling pressure as cool wet weather continues to increase the size of the US crop. This weather pattern has improved the potential yield for crops in the key growing areas. Temperatures in the Midwest have also been below normal. There has been very little stress on the crops. 70% of the corn crop is in good to excellent condition. Another negative for corn was a decrease in the price of gasoline.

 

Wheat is also at its lowest price level since March on export prospects. Strength of the dollar made wheat less desirable as an export item. Wheat has fallen in price by 18% over the last two months. Prices have to fall to improve export demand and overcome the strength of the dollar.

 

                                                                 Support                                         Resistance

Nov Soybeans                                          8.95                                        9.48

Sept Corn                                                3.10                                        3.29

Sept Wheat                                              5.05                                         5.33

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.