Weekly Futures Report

Crude oil shook off early selling after the dollar became weak again

08.06.09

Filed 7:59 am Thursday     

                                                            Last                                            Last Week  

Sept Crude                                        71.72                                              63.35

Sept Heat                                          195.35                                           169.58

Sept XRB (Blended Gas)               205.35                                            182.01

Oil retreated from a seven week high after the government released its inventory report on Wednesday morning. The Energy Department report showed a greater than expected increase in crude supplies. Crude stocks now sit at a five-week high. Refinery runs also fell to 84.5%, the lowest level in more than two months. The reason that the refiners have to drop their utilization levels is because there’s just too much product available. For the latest reporting week, crude stocks rose 1.67 million barrels versus an expected 600,000 barrel build. Gasoline stocks are down 2.18 million barrels versus an expected drawdown 800,000 barrels. Distillates are also down 1.136 million barrels versus an expected build of 122,000 barrels. To some degree, the drawdown in crude stocks was offset by the increase in products. Also, crude oil shook off early selling after the dollar became weak again. Crude oil and the dollar still maintain an 82% correlation. Despite the daily noise, crude inventories remain at historic levels while demand remains slack. The technical picture however remained strong. There is the idea that the US economy is coming out of recession demand for energy will be higher. The reality is that the economy is probably entering a protracted period of slow growth and excesses in the supply/ demand ratio of crude oil have yet to be worked out. The market will be very sensitive to Friday's employment figures. The price differential between London crude and West Texas intermediate crude continues to be a bullish influence on the market.

 

                                                           Support                                     Resistance

Sept Crude                                             68.80                                               72.80 

Sept Heat                                               186.00                                           198.20

Sept Gas                                                200.00                                            207.25                                                               

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METALS

                                                                     Last                                              Last Week    

Dec Gold                                                   965.30                                              929.60

Sept Silver                                                  14.68                                             13.285             

Oct Platinum                                              1278.50                                         1172.20

Gold really took its cue over the past week from technical price breakouts in the major currencies against the US dollar. Also higher prices for equities, actually the highest levels of the year, proved to be support for gold. Breakouts in the euro currency and the British pound supported gold. Additionally, belief that the recession is over for the US economy encouraged a renewal of risk appetite and this spilled over into gold. Volume remains very light, however. It's partially a function of summer but it's also a function of short covering. In the bigger view it's difficult to see gold maintaining higher levels for an extended period of time unless the dollar continues to remain weak.

 

                                                             Support                                      Resistance

Dec Gold                                             956.00                                           975.00

Sept Silver                                            14.40                                             14.89               

Oct Plat                                               1248.00                                       1305.00

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SOFTS

                                                                       Last                                     Last Week

Sept Coffee                                                 131.80                                    122.85

Oct Sugar                                                     19.68                                       18.56

Coffee also continued to rally on the back of a weak dollar. As prices continued to rise, Vietnam is gearing up to increase exports to a new high for the year. The market sold off however when news hit the wires that US service industries contracted at a faster pace than expected. This may indicate that demand may contract as more jobs were eliminated from the US economy than economists had previously speculated. Overall, coffee is up 17% on the year. Money flow in coffee remains positive. In terms of the chart, coffee looks as though it is running out of upward momentum and a significant retracement from high to low has occurred and that profit taking should be expected if the market sees further job loss with Friday's unemployment numbers.

 

 

Sugar rose to its highest levels since 1983 in London trading. Monsoons in India have been termed deficient and as a result Indian production will be less than expected. Because of this the global deficit in sugar is expected to continue. The key growing region in India has cut its forecast of 4.6 million metric tons compared to last year’s crop of 9.1 million tons. Lack of producer selling is also encouraging higher prices. Money flow continues to be positive. Looking at the chart, it's too early to call a major top.

 

                                                          Support                                   Resistance

Sept Coffee                                                    128.00                                     135.00

Oct Sugar                                          18.50                                        20.50

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                                                                  Last                                    Last Week

Nov Soybeans                                       10.32                                              9.162

Sept Corn                                              3.446                                           3.206     

Sept Wheat                                            5.236                                          5.114

Soybeans had been firm in price but profit taking set in on the expectation that exports from the United States will slow and domestic inventories will build. A noted trade house stated that inventories in the United States should rise to 259 million bushels, an increase from the current estimated stockpot of 95 million bushels. Money flow in soybeans remains positive, however. The chart indicates that soybeans will come over and resistance at 1050 and, as with many markets, prices rebounded significantly from the highs of the early June to the lows of early July.

 

 

Corn also had rallied until a major trade observers reported that US output of corn will rise significantly as yields surpass estimates. Current production is speculated to increase 12.5 billion bushels, up from 12.1 billion bushels. Corn could reverse on Thursday on a close below 3.46.

 

 

Wheat was under selling pressure over last several sessions due to speculation that increased rainfall in Russia and North America will continue to boost production levels. Wheat is the weakest performer in the grain complex. Money flow will reverse its intermediate trend to negative if the market closes below 529 on Thursday.  

 

 

 

                                                                 Support                                         Resistance

Nov Soybeans                                          10.14                                       10.63

Sept Corn                                                3.28                                        3.68

Sept Wheat                                              5.08                                         5.57

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.