Crude fell under $69 a barrel after the US Department of Energy reported that crude stocks climbed by 2.6 million barrels

09.23.09

Filed Wednesday  3:40 pm

ALL CHARTS ARE WEEKLY    

                                                            Last                                            Last Week   

Nov Crude                                         68.98                                               72.87   

Nov Heat                                            179.11                                          185.77

Nov XRB (Blended Gas)                   171.95                                          185.01

Crude oil fell in New York just before the release of the Department of Energy report regarding weekly supply and demand. The reason for the selling pressure was due to the belief that traders anticipated that distillate fuel stocks would continue to remain at 26 year highs. Traders thought that the Energy Department would report a 1.45 million barrels increase in distillate fuel inventories. Stocks should be at their highest levels since January 1983. Taken on the basis of fundamentals, the balance between supply and demand, current levels are overpriced. The futures market is up about 60% this year reflecting the idea that global fuel consumption would recover along with a general economic recovery. After the close yesterday, the American Petroleum Institute stated that US gasoline supplies increased by 3.8 million barrels to 212.6 million barrels. They also stated that crude stocks rose by 200,000 barrels to 337.2 million barrels, the highest level in three weeks. Some traders believe that macroeconomic conditions are slightly improving but the overall supply demand balance is not correctly priced. One support for the price of crude has been dollar weakness, particularly against the EC.

Crude oil fell below $69 a barrel after the United States Department of Energy report said that crude stocks climbed by 2.6 million barrels to 335.6 million barrels. Traders had been looking for a decline of 1.4 million barrels. Also supplies of gasoline and distillate fuels also rose. Crude stockpiles are 9.1% above the five-year average. The year on year comparisons were thought to be potentially distorted because of hurricane activity last summer.

                                                           Support                                     Resistance

Nov Crude                                             68.00                                                73.50 

Nov Heat                                               176.40                                             189.00

Nov Gas                                                170.00                                              182.50                                                               

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METALS

                                                                     Last                                              Last Week     

Dec Gold                                                 1015.40                                               1020.20

Dec Silver                                                  19.97                                                    17.42              

Oct Platinum                                          1334.00                                               1343.00

Gold saw profit taking on Wednesday as the oil complex sold off sharply in the wake of the release of the Department of Energy report showing weekly supply and demand. Also, the dollar was slightly stronger in front of the communiqué from the Federal open market committee meeting. Previously the US dollar index slipped to a one-year low on the idea that the global economic recovery is gathering speed. It was widely anticipated that the Federal Reserve would leave short-term rates unchanged. Gold reached an 18 month high at 1025 on September 17. Also traders are looking forward to the G-20 meeting scheduled to get underway in Pittsburgh. Traders are looking to the Fed and seek some guidance regarding quantitative easing. Supposedly, the Fed has already talked to banks regarding repurchase agreements to try and drain liquidity from the system. Money flow in gold remains negative as it does in silver. A negative for gold market on Wednesday was the decline in copper by more than 8 cents. The Fed did say business activity had picked up in the majority of areas but would still leave short term rates between 0 to .25.  A negative for gold is continuing high unemployment an the Baltic dry weight index in contraction.

   

 

                                                    Support                                      Resistance

Dec Gold                                    996.50                                             1031.00                                                              

Dec Silver                                   16.58                                              17.61                       

Oct Plat                                       1314.00                                          1354.00    

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SOFTS

                                                                       Last                                     Last Week

Dec Coffee                                                 136.15                                      134.10

Oct Sugar                                                    21.55                                       22.49

Sugar prices came under selling pressure due to reports that India has slowed their buying and the idea that output from Brazil will continue to be high. India has probably finished the majority of its buying for the year. Above normal rainfall in Brazil signifies a better-than-expected crop. Money flow in sugar is negative.

 

 

                                                          Support                                   Resistance

Dec Coffee                                         134.00                                     140.00

Oct Sugar                                          20.87                                       22.90

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                                                                  Last                                    Last Week

Nov Soybeans                                        9.204                                     9.504

Dec Corn                                                3.302                                    3.362     

Dec Wheat                                              4.60                                     4.672

Soybeans remained under selling pressure. Production in India which is the largest exporter of soybean meal may increase by 12% next year after farmers devoted more acreage to the crop. Soybean meal prices have declined by 16% over the past year. Soybean production in the US will climb to a record 3.245 billion bushels, up 9.7% from last year. Money flow remains negative for this market.

 

Corn fell in price to mirror the decline in crude oil futures. Corn can be easily processed into ethanol to increase gasoline supplies. Expectations continue for a US bumper harvest. Corn yields in the United States are expected to rise to a record 161.9 bushels an acre. China may import US corn to offset price pressures from their domestic corn. Money flow in corn remains negative.

 

The lowest prices for wheat May of 2007 could induce farmers to plant less winter wheat with the hope of increasing prices. Winter varieties of wheat which are sown from September to November account for 70% of all wheat grown in the US. Cash prices for wheat are 25% lower for the year. Money flow for wheat remains negative.

                                                                Support                                         Resistance

Nov Soybeans                                          8.93                                             10.30

Dec Corn                                                3.11                                                3.33

Dec Wheat                                              4.45                                                 4.69

 

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.