Renewed demand from China, the world's fastest growing end use of crude oil, helping crude oil rally

Weekly Futures Report

08.12.09

Filed  4:50 Wednesday     

                                                            Last                                            Last Week   

Sept Crude                                      70.23                                                71.72

Sept Heat                                          189.95                                           195.35

Sept XRB (Blended Gas)                 202.62                                          205.35

During early trading on Wednesday, crude oil and its products rallied sharply when the International Energy Agency raised its worldwide demand forecast for both this year and 2010. The Agency pointed to renewed demand from China, the world's fastest growing end user of crude oil. According to the IEA, the world will need an average of 85 million barrels of oil a day next year, an upward revision of 70,000 barrels a day. At the same time, the Agency increased its predictions for supply from sources other than OPEC. The head of the Agency cautioned that demand in developed economies remains very sluggish, however. Chinese crude imports continue to increase. The Chinese stimulus package is expected to increase its demand by 4% to 8.4 million barrels a day. The head of the agency went on to state that industrial production has yet to see its ultimate bottom in the United States. Global demand is expected to continue to contract by 2.7%. Non-OPEC members are expected to account for about 60% of global supply. They should provide about 51 million barrels a day next year. Demand from OPEC producers should remain steady at 27 million barrels a day. The next regularly scheduled meeting for OPEC is on September 9. OPEC's own estimates for demand are lower than the IEA. Money flow in crude oil remains negative and lower prices should be expected. For the latest of reporting week, crude oil saw an increase in supplies of 2.52 million barrels while the trade had been looking for an increase of only 1 million barrels.

 

 

                                                           Support                                     Resistance

Sept Crude                                             67.30                                               72.30 

Sept Heat                                               186.00                                            198.20

Sept Gas                                                198.50                                            207.25                                                               

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METALS

                                                                     Last                                              Last Week     

Dec Gold                                                    947.50                                           965.30

Sept Silver                                                  14.50                                             14.68              

Oct Platinum                                              1245.00                                        1278.50

In early trading on Wednesday, the International Energy Agency report regarding an increased need for crude oil due to expanding economies managed to send the stock market higher and the dollar lower. This move directly benefited the price of gold which was up approximately 5 dollars in front of the release of the communiqué at the conclusion of the Federal open market committee meeting. The overall trend, at least on an intermediate basis, for gold is negative. The Federal Reserve will not change targets for interest rates over the near term. The Fed will also wind down its program of quantitative easing sometime in October. The release of the communiqué at 2:15 spiked gold higher to 954 before falling back to 948 to mirror the movements in the dollar against other major foreign currencies.

                                                    Support                                      Resistance

Dec Gold                                             939.00                                           956.00

Sept Silver                                            14.00                                             14.60                

Oct Plat                                               1225.00                                       1271.00

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SOFTS

                                                                       Last                                     Last Week

Sept Coffee                                               135.40                                      131.80

Oct Sugar                                                   22.79                                       19.68

Sugar continues to move radically higher because of the projected world deficit. The monsoon season in India has been inadequate enough to cause great concern about the upcoming world crop.

 

                                                          Support                                   Resistance

Sept Coffee                                                    132.00                                     139.00

Oct Sugar                                          20.55                                        23.00

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                                                                  Last                                    Last Week

Nov Soybeans                                        10.44                                       10.32

Sept Corn                                                3.306                                      3.446      

Sept Wheat                                              4.902                                     5.236

The Department of Agriculture came out with a surprise survey of acreage and announced that corn acreage will be 7 million bushels, unchanged from the previous estimate taken in July. The department was interested in the effect of delayed plantings and a very wet spring and how that would impact corn yields. Corn stockpiles will be 4.6% higher than forecast last month. Wheat supplies will also rise and soybean inventories are expected to decline. About 1.62 billion bushels of corn should be in storage at the end of August compared to an early estimate of 1.55 million bushels made on July 10. Wheat supplies should total 743 million bushels up 5.2% from the previous forecast from mid-July. Soybean stockpiles should total 210 million bushels down 16% from last month's estimate of 250 million bushels.

Wheat traded to its lowest level in five months after the Department of Agriculture stated that inventories in crop yields for US and global inventories will be greater than current forecasts. The US stockpile for wheat should total 743 million bushels. Previously the consensus estimate had been for 741 million bushels. Previously the USDA had estimated a stockpile of 706 million bushels just last month. Global stockpiles will be 183 million bushels up from 181 million bushels. Wheat is down 38% over the past year.

 

                                                                 Support                                         Resistance

Nov Soybeans                                          9.91                                       10.65

Sept Corn                                                3.05                                        3.31

Sept Wheat                                              4.73                                         5.05

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.