Crude Oil demand is slack but futures prices continue to rise

Weekly Futures Report

05.27.09

Filed 10:35 pm Wednesday    

                                                       Last                                            Last Week  

July Crude                                    62.90                                              61.46 

July Heat                                       157.59                                           155.15

July XRB (Blended Gas)              183.69                                           176.50

The price of oil fell Wednesday after it became known that Saudi Arabia's oil minister indicated that the cartel did not need to cut output. At the same time, the US stock market slumped as the cost of money increased due to an increase in treasury auctions. OPEC believes that oil demand is recovering sufficiently enough to leave current production levels unchanged. OPEC is currently meeting in Vienna. Many fundamental traders believe that demand will continue to remain slack, however. Yesterday, crude oil traded at levels not seen since November 5. OPEC will leave quotas unchanged trying to squeeze as much as possible out of the current price advance. The Venezuelan Oil Minister believes that the markets oversupplied by about 1 million barrels a day and a production cut will eventually be necessary. The real problem with the market may be the cost of money. The yield curve or the difference between the two year and 10 year notes is at record levels and could eventually derail the economy and result in lower prices. The Department of Energy figures regarding supply and demand were delayed a day due to the Memorial Day holiday on Monday. According to the American Petroleum Institute which released its data on Wednesday evening, crude stocks fell by 2.8 2 million barrels to 364.7 million barrels. Gasoline stocks dropped 758,000 barrels to 205.4 million barrels. Money flow in crude oil remains positive.

                                                                Support                                     Resistance

July Crude                                            58.50                                              64.50  

July Heat                                              146.80                                          163.70

July Gas                                                 172.00                                         188.75                                                               

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METALS

                                                                     Last                                              Last Week    

June Gold                                                 947.60                                              938.70

July Silver                                                 14.76                                               14.28              

July Platinum                                            1138.00                                        1154.90           

Gold fell for a second day in New York as the dollar became stronger against major foreign currencies. The dollar index strengthened for the third consecutive day. With the huge supply of new debt coming to market, US interest rates backed up making the dollar more attractive on the basis of interest rate differentials. Just last week, the dollar was at a five-month low against the EC. Earlier in the week, the dollar benefit from a higher than expected showing in consumer confidence to the highest level in six years.

 

Platinum fell back in price as it is believed that automobile industry demand will take longer to develop than previously thought. 90% of General Motors bondholders failed to convert their debt for equity thereby pushing the Corporation closer to bankruptcy. Most platinum and palladium is used in catalytic converters.

 

 

                                                       Support                                      Resistance

June Gold                                            926.00                                         973.00  

July Silver                                            14.09                                           15.05        

July Plat                                              1107.00                                        1181.00      

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SOFTS

                                                                       Last                                     Last Week

July Coffee                                              135.50                                            133.80

July Sugar                                                15.77                                               15.38

Coffee fell from its highest price in eight months as the dollar rebounded against major foreign currencies. Fundamentals for the coffee will remain positive. Coleus crop is expected to fall to 11 million bags, the smallest crop since 2001. Supplies in exchange approved warehouses are at their lowest levels since February of 2007. Money flow for coffee remains positive. Money flow for sugar remains positive.

 

                                                           Support                                   Resistance

July Coffee                                     129.50                                       140.00              

July Sugar                                       15.25                                        16.30                                         

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                                                                  Last                                    Last Week

 July Soybeans                                     11.87                                        11.674

July Corn                                              4.26                                         4.256

July Wheat                                            5.972                                        5.886

Soybeans rallied to eight-month high thanks to record imports by China. The Chinese are currently committed to increasing imports to build reserve inventories. China wants to stockpiles 7.2 5,000,000 tons of soybeans by the end of June. US inventories are expected to drop to a five-year low of 130,000,000 bushels. A stronger dollar should induce some profit-taking however.

 

Corn fell in price for the second straight session on the idea of livestock producers are reducing purchases of grain after they hit seven-month highs. Livestock industry is losing money so herd liquidation may increase thereby reducing the demand for grain. US farmers accelerated the planting of the nation's biggest crop last week in maybe half to meet demand. 82% of the crop is in the ground. Wet weather had delayed planting.

 

 

                                                              Support                                    Resistance

July Soybeans                                       11.38                                           12.11     

July Corn                                               4.155                                           4.39  

July Wheat                                            5.955                                            6.50    

Chuck Kespert

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.