Oil trades lower over the past five sessions due to declining demand and a lower stock market

09.02.09

 

Filed Wednesday 2:46 pm

ALL CHARTS ARE WEEKLY    

                                                            Last                                            Last Week   

Oct Crude                                          68.11                                              71.33

Oct Heat                                             175.10                                          187.41

Oct XRB (Blended Gas)                    180.75                                          184.43

Oil traded lower over the past five sessions due to declining demand and a lower stock market. Oil traded lower initially Wednesday on the release of the ADP private industry forecast regarding jobs which showed a greater loss than initially expected.  The Department of Energy figures reflected a draw down of 900,000 barrels of crude oil compared to an expected drawdown of 372,000 barrels. The trade was looking for drawdown in gasoline stocks of 900,000 barrels and instead saw a more bullish drawdown of 3 million barrels. It should be mentioned however that we are at the end of the driving season and gasoline demand seasonally declines at this time. Distillate stocks increased 675,000 barrels while traders were looking for an increase of 1.2 million barrels, another bullish reading. Technically however,  the market has turned lower in terms of money flows and $70.50 should contain any advance. The oil market remains sensitive to the fortunes of the stock market and  September, statistically is unkind to the equities market. Also in the news, British Petroleum stated that they have made an oil discovery 7 miles beneath the Gulf of Mexico. The prospective field may contain 3 billion barrels of oil. British Petroleum expects to increase output in this region by over 50% to 600,000 barrels a day by the year 2020.

 

                                                           Support                                     Resistance

Oct Crude                                             65.90                                     72.50 

Oct Heat                                               169.70                                              182.00

Oct Gas                                                173.00                                              185.50                                                               

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METALS

                                                                     Last                                              Last Week     

Dec Gold                                                  979.00                                                 946.20

Dec Silver                                                 15.415                                                  14.29              

Oct Platinum                                           1232.70                                             1237.50

As the stock market traded lower due to a re-examination of current valuations, the gold market attracted buyers as a hedge against risk. Gold found buyers even as crude oil, soybeans, copper and a variety of other markets all traded significantly lower. The only market that matched gold’s gains on Tuesday was the Japanese yen.  Another possible factor behind the buying of gold is the recent situation regarding Swiss banks and their banking privacy laws. After the US government was able to obtain a list of thousands of investors with Swiss bank accounts, some Swiss banking officials are suggesting to their clients to sell all their US securities. This kind of consideration could drive some investors to seek alternative vehicles such as gold, especially in a time of uncertainty and transition. Technically, gold is in an interesting position. The formation is an ascending triangle. Simply enough, if the market breaks the top side of the triangle, it could trade up to $1300, while a break of the downside rising triangle could see prices fall to $850.00.

 

 

                                                    Support                                      Resistance

Dec Gold                                    943.00                                             975.00                                                    

Dec Silver                                   14.50                                              15.45                       

Oct Plat                                       1202.00                                          1272.00    

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SOFTS

                                                                       Last                                     Last Week

Dec Coffee                                                  121.25                                       124.50

Oct Sugar                                                    23.38                                          22.40

As with most commodities, with the exception of gold, coffee traded lower over the past five sessions. Separately, the average price for Kenyan coffee rose by 4.4% on declining good supplies and increasing demand. Overall, with rising unemployment and economic contraction still a real possibility, the general price of coffee continues to point lower.

 

Sugar may be topping out as well. After a sharp run from June to September the market looks as if it's putting in a complex top. In fundamental news, sugar mills in Brazil, the world's biggest producer, are not able to increase capacity and take advantage of higher prices because of credit concerns.

 

 

                                                          Support                                   Resistance

Dec Coffee                                         118.50                                     123.00

Oct Sugar                                          21.20                                       22.50

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                                                                  Last                                    Last Week

Nov Soybeans                                         9.510                                         9.964

Dec Corn                                                 3.192                                         3.264     

Dec Wheat                                              4.856                                       5.066

Grains fell in price chiefly due to forecasts of larger than anticipated crops. Private   forecasters suggest that corn and soybeans will come in even higher than forecasts made by the US Department of Agriculture. Also, China has cut back on soybean imports. The soybean harvest should reach a record 3.26 billion bushels or 2.1% more than the forecast by the USDA according to outside forecasters. Last year’s 's crop was 2.95 billion bushels. China is rumored to have purchased 2.6 million metric calmness of soybeans oil seed this month, below the 3 million ton mark for  s for second straight month. Weather in the Midwest continues to be nearly perfect. Relative strength of the dollar recently has also been a negative for the market. December wheat on Tuesday dropped .4% yesterday in a continuation of trend.  On Wednesday, even as gold was $20 higher, soybeans 7 cents lower by midday while corn was 3 cents off yesterday’s final and wheat was off by 2 cents as prices continued to grind lower into the pressures of the harvest.

 

                                                                 Support                                         Resistance

Nov Soybeans                                          9.26                                               10.03

Dec Corn                                                3.09                                                3.35

Dec Wheat                                              4.715                                                  5.07

 

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.