Crude inventory falls by 9.85 million barrels to 346 million barrels

12.15.10 Filed Wednesday 6:35 pm

ALL CHARTS THIS WEEK ARE Hourly Bars

Last Last Week 12.08

Feb Crude 89.12 88.82

Feb Heat 249.29 247.98

Feb Gas (Blended) 230.77 230.41

Crude oil maintained its recent price advance even as most markets

were under pressure Wednesday. The weekly report from the

Department of Energy stated that crude inventories fell by 9.85 million

barrels to 346 million barrels. The trade had been looking for a draw of

only 2.5 million barrels. Supply/demand ratios were also affected by a

15% decline in imports. This was the lowest level of imports since

September of 2008. At the same time, refineries were busy, operating at

88% of capacity which is the highest level since September. Some

believe that these numbers are so out of line, so beyond consensus

expectation that a near term shortage of oil in the US may be the

consequence. If perceived demand increases, prices would be pressed

higher going into year end. Crude is 25% higher than a year ago. Part

of the draw in supplies was due to tax consequences of oil stored in Gulf

Coast tanks. Taxes are levied against this oil at year end so producers

want as little supply as possible in this geographic location for the time

being. Market observers say there will be an influx of oil into the Gulf

barrels. The trade was looking for an increase of 2 million barrels.

Distillate fuel stocks, which include heating oil, rose by just over 1

million barrels to 161.3 million barrels. Fuel consumption is higher by

1%, a sign of modest economic recovery. This is the best level of

consumption since June of 2009. There was also an uptick in the

Empire State Manufacturing Index. Money flow in heating Oil is

positive and negative in gasoline which can be attributed to seasonal

expectations and demands.

Support Resistance

Feb Crude 87.00 90.00

Feb Heat 243.90 252.00

Feb Gas 227.00 235.00

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METALS

Last Last Week

February Gold 1386.2 1382.40

March Silver 29.25 28.40

Jan Platinum 1713.90 1685.70

Gold and silver were under selling pressure on Wednesday because the

dollar was stronger against its major trading counterparts. Recent

economic data suggests modestly improving economies both here and in

Japan while interest rates continue to remain relatively low. Gold has

put in another positive year, up 25% from year ago levels. Inflation

levels remain low so the need to hedge hasn’t quite arrived yet.

Industrial production came in at better than expected levels. However,

as the markets had into year end, rates have begun to back up and this

is a gold market negative. The only competition gold has is the cost of

money. Another negative is that China is looking to slow down its

economy by probably raising short term rates. Money flow in gold

remains positive, however. Money flow in silver remains positive as

well. Money flow in platinum is negative.

Support Resistance

February Gold 1361.000 1421.00

March Silver 26.40 30.30

Jan Plat 1653.00 1724.00

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SOFTS

Last Last Week

March Coffee 217.50 204.65

March Sugar 31.11 28.98

Sugar continued to trade at better levels for the fourth straight day in

the belief that increased exports by India may not be sufficient enough

to satisfy increasing global consumption. Demand for sugar should be

approximately 165 million metric tons, 3 million tons greater than

output. Trade sources had previously pegged the world sugar surplus at

1.2 million metric tons. Asia is expected to have a deficit of over 1`3

million metric tons which could have a seriously negative impact on

prices. Output in Brazil’s key growing region fell by 18%. Money flow

in sugar, not surprisingly, is positive.

.

Support Resistance

March Coffee 203.00 217.00

March Sugar 27.00 31.00

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Last Last Week

January Soybeans 12.964 12.96

March Corn 5.842 5.744

March Wheat 7.646 7.84

Soybeans, even in the face of a stronger dollar, traded to a fresh one

month high on Wednesday. Prices ere lifted by ideas that dry weather in

Argentina will reduce yields.

Corn was off by 3 cents on profit taking after reaching levels not seen

since early November. Corn is up 56% since the end of June. The dollar

moved to its best levels in three week as S&P put Spain on credit watch.

Wheat prices were supported by wet weather in Australia.

Consequently, almost two thirds of the crop in three key growing

regions may only be fit for feed. Money flow in wheat is positive.

.

. Support Resistance

January Soybeans 12.41 13.22

March Corn 5.415 5.95

March Wheat 7.39 8.02

Chuck Kespert from NY/NY