Gasoline traded at its best level in five months on October

10.13.10 Filed Wednesday 6:50 pm

ALL CHARTS THIS WEEK ARE Hourly Bars

Last Last Week

November Crude 83.07 83.12

November Heat 229.97 2.3085

November Gas (Blended) 215.89 2.15

The US Department of Energy report for the latest week regarding

weekly supply and demand ratios was delayed by a day due to the

Columbus Day holiday observed on Monday. As far as trade

expectations, players were looking for a decline in gasoline supplies,

possibly as low as the lowest levels seen in June as refiners switched

over from gasoline production to heating oil production and performed

maintenance on refineries. Gasoline traded at its best levels in five

months on October 7 as a strike in Marseille, France entered its third

week and was threatening to curtail imports into New York Harbor.

Refinery runs at 83.1% of capacity is the lowest level since 2002. A

countrywide strike by the French against refiners by gas and power

workers has severely lowered the country’s crude oil processing rates.

Gas imports into the Northeast US fell it by 24% for the week ending

October 1. Even still, gasoline inventories are 9.6% higher than the fiveyear

average. Players are also expecting crude stocks to rise 1.4 million

barrels. A damaged electrical tower last week closed the Houston

shipping channel which also adversely affected the supply chain.

Traders are looking for a drop of 1.8 million barrels of distillate fuels

including heating oil. Inventories of distillates at the end of August were

at their highest levels 1983 and 22% above the five-year average. A

positive for the complex on Wednesday was the reading by world

markets of the minutes of the Federal Reserve Open Market Committee

meeting. The consensus is that a further stimulus in the form of

quantitative easing will be conducted by the Federal Reserve sometime

in November, possibly as much as $500 billion and this lifted economic

prospects, reflected by world stock markets on Wednesday. The US

Department of Energy did boost its price forecast by $1 a barrel on the

prospect for better world economic growth and that the subsequent offtake

in inventories would support prices. Money flow for crude oil

remains positive while seasonal tendencies are bearish over the next few

weeks.

Support Resistance

November Crude 78.00 85.00

November Heat 2.20 2.35

November Gas 2.00 2.20

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METALS

Last Last Week

December Gold 1371.90 1349.70

Dec Silver 23.96 23.17

Jan Platinum 1709.50 1717.00

Gold continued to soar, breaking to new highs on Wednesday. The

latest surge was attributed to the market’s interpretation of the minutes

from the latest Federal Open Market Committee meeting. The

consensus is that the Fed will launch a second round of quantitative

easing in November to stimulate the US economy. Unintended

consequences aside, many view this as being dollar negative and

ultimately inflationary. The common perception is that virtually all

central banks are actively debasing their currencies to improve their

export prospects. This activity even has a name: “The Race to Zero.”

With nominal rates so low, gold has little in the way of competition.

Real estate is no longer a 20% per year increasing asset. Meanwhile,

silver has extended its rally to its best price level since 1980. Should the

Fed do as forecast and buy $500 billion of government securitiess,

interest rates should continue lower and pressure on the dollar should

continue. Gold is up 23% for the year. The long side of gold is a

crowded room at this point however and a retracement of the chart

speed line should be anticipated. Traders should not forget about money

management when prices seem mono-directional.

Support Resistance

December Gold 1335.00 1380.00

Dec Silver 22.80 25.00

Jan Plat 1668.00 1725.00

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SOFTS

Last Last Week

December Coffee 186.15 176.50

March Sugar 27.43 23.45

Coffee moved to a one week high on the back of a weaker dollar. Prices

reached levels not seen since the end of September.

Sugar has been very strong, up 46% for the third quarter, to reflect

shipping delays in Brazil. Market observers believe that adverse

weather will continue to effect harvesting and shipments. The Thai

market has been re-estimated to be able to export only 4 million tons.

Market watchers say that there is not enough sugar to meet Brazil’s

internal demand. South Africa’s harvest may be the smallest in 15 years

due to drought. Tempering this bullishness is news that India, the

world’s largest end user, may produce more than previously forecast.

Support Resistance

December Coffee 171.00 191.00

March Sugar 25.50 28.50

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Last Last Week

January Soybeans 11.87 10.72

December Corn 5.692 4.884

December Wheat 7.026 6.582

Soybeans pushed to their best price levels in nearly 1 ½ years on a

weaker dollar making US exports desirable and an increase in Chinese

demand. Investor demand for commodities as an asset class has also

surged as many believe that the Federal Reserve is seeking to inflate the

economy by maintaining interest rates at artificially low levels

indefinitely. Although Chinese demand remains good, imports have

actually declined for three consecutive months. Soybeans are positive in

terms of money flow.

Adverse weather in the Midwest US should reduce corn yields. As the

trading day matured, sellers came into the market as players thought

that higher prices would eventually curb demand. Livestock producers

are looking to reduce herd levels rather than feed them expensive

grains. Corn output should be 3.4% lower than last year. Corn is

positive in terms of money flow.

Wheat had the same trading pattern: very strong in the beginning of the

session, weak going into the close. Wheat is negative in terms of money

flow.

Support Resistance

January Soybeans 10.50 12.20

Dec Corn 4.50 6.25

Dec Wheat 6.50 7.50

Chuck Kespert from NY/NY