Crude rallies sharply on greater than expected gasoline supplies while the dollar falls against most major foreign currencies

Weekly Futures Report

10.21.09

Filed Wednesday 3:15 pm

ALL CHARTS THIS WEEK ARE 60 minute bars (with one exception)   

                                                            Last                               Last Week   

Dec Crude                                         81.38                                  75.54  

Dec Heat                                            213.50                              197.10

Dec XRB (Blended Gas)                   206.52                             187.67

Crude oil rallied sharply on Wednesday after the release of the report from the Department of Energy which indicated that gasoline supplies fell by a greater than expected 2.2 million barrels. The drawdown was greater than the median expectation of market watchers. Crude also rallied as the dollar fell against most major foreign currencies and the stock market rallied on better than expected earnings reports. The drawdown in gas stocks suggested to some that consumer demand was improving. Over the past several weeks, refiners had allegedly been cutting back on buying crude due to decreased profit margins and the idea that demand was soft as well as seasonal considerations. The fact that there was a drawdown in gasoline suggests that refiners will have to ramp up their buying. On this news, heating oil and gasoline were up 2% on the day.  Short covering was also seen across the board in all three major energy markets. The Euro Currency traded above 1.50 for the first time since August of 2008. Crude stocks were actually higher by 1.3 million barrels to 339 million barrels, the highest level since August. The trade had been looking for an increase of 1.5 million barrels. The less than expected build in stocks was also viewed as a positive. Money flow remains positive for all three markets.

Longer view/mkt has potential to reach 85 on retracement from highs

 

                                                              Support                               Resistance

Dec Crude                                             77.00                           81.50        

Dec Heat                                               205.00                          215.00

Dec Gas                                                 195.00                               205.00                                                              

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METALS

                                                            Last                             Last Week     

Dec Gold                                           1063.6                              1061.90  

Dec Silver                                          17.80                                 17.875              

Jan Platinum                                   1372.5                               1366.40

Gold rallied on Wednesday to reflect a surge in crude oil prices and continued pressure on the dollar against most major foreign currencies. The dollar index dropped to a 14 month low. As of 1:00 pm in NY, even will all the volatility seen in surrounding markets, gold was trading at the same price as last Wednesday at this time while silver was 10 cents under last week at this time while Platinum was a respectable $8 higher. As long as the Fed is willing to let short term interest rates stay at or near zero and as long as the Fed shows no inclination to withdraw the massive stimulus it has applied to attempt to revive the US economy, gold will continue to find buyers on sell offs as a de-facto currency. On the side of caution, the fact that gold has been reluctant to move higher over the past week indicates that buying interest may be drying up, all buyers may be committed and profit taking may be featured shortly. Hedge funds and speculators are holding record long positions so long liquidation shouldn’t surprise anyone given the current dynamic structure of the market.    

 

 

                                                    Support                                      Resistance

Dec Gold                                   1041.00                                 1075.00                                                          

Dec Silver                                   17.10                                         18.17                      

Jan Plat                                     1331.00                                        1395.00    

                                     *********************************

SOFTS

                                                                Last                          Last Week

Dec Coffee                                        144.10                                  139.00

Mar Sugar                                          24.04                                   22.62

Coffee fell on Tuesday by the most in almost weeks basically on profit taking as prices had reached a 13 month high. In addition to speculative profit-taking there was some hedge selling as well. Coffee had been up as much as 13% in just October, registering the biggest monthly gain since last May based on a weak dollar. Also coffee was bought as it’s a prominent member of an asset class seen as a hedge against inflation. On Monday coffee reached its best trading levels since September 5, 2008. Money flow in coffee remains positive.

 

India, the world's second largest producer of sugar, raised its crop forecast for the latest production season. India produced about 15 million tons of sugar last year, 44% less than a year earlier due to drought considerations. Sugar has doubled in price this year. Going forward, better-than-expected rains in India over the past two months will help boost production. Over the past year the monsoon season produced 23% less rainfall than usual. Even though it's the second-largest producer, India will still import 1.5 million to 2 million tons of raw sugar this year mostly from Brazil, the world's largest producer. Money flow in sugar remains positive.

  

                                                Support                                  Resistance

Dec Coffee                              138.00                                     146.00       

Mar Sugar                                  22.50                                      24.80

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                                                                  Last                            Last Week  Jan Soybeans                                       10.096                                  9.98

Dec Corn                                               3.982                                   3.83    

Dec Wheat                                            5.424                                   5.13

Wheat rallied to a 10 week high as the dollar lost ground against major foreign currencies. The EC rallied to a 14 month high against the dollar and this factor alone helped to lift most commodity markets. Wheat was up almost 16 cents going into the closing hours of trade on Wednesday. Short covering was seen across the board. Money flow on wheat remains positive.

 

 

Corn advanced to a three-month high as rains delayed the US harvest. Cold weather also was a problem for harvesters. About 17% of the corn crop was in by October 18. This compares with 28% harvested at this time last year. The weaker dollar also supported prices.

 

Soybeans flew up the charts on Wednesday to keep pace with the gains seen in corn and wheat and to mirror the eroding purchasing power of the declining dollar. Soybeans have enjoyed a serious rally since the beginning of October when prices were as low as 8.86. With prices now stand at 10.09 and the relative strength of the market is   edging towards 70 (currently at 62.7). Should prices spike into psychological resistance at 10.50, caution would be warranted.

  

                                                                Support                          Resistance

Jan Soybeans                                          9.67                                  10.17

Dec Corn                                                3.75                                    3.93

Dec Wheat                                              4.98                                    5.36

 

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.