Crude oil supplies are adequate - Futures prices fall

Weekly Futures Report

06.24.09

Filed 5:10 pm Wednesday     

                                                       Last                                            Last Week   

Aug Crude                                   68.55                                              71.56

Aug Heat                                      178.87                                          189.26

Aug XRB (Blended Gas)             185.65                                         200.00

On Wednesday, the Department of Energy stated that crude supplies for the latest reporting week were lower by 3.87 million barrels. This was offset by an increase of 3.87 million barrels for gasoline and an increase of 2 million barrels for distillates. The market was somewhat responsive to news that durable goods orders were better than expected, a sign of economic strength. The market was also initially higher as the equity market rallied. Prices fell as the dollar gained strength against virtually all foreign currencies on Wednesday as the Swiss central bank apparently intervened, selling their currency. A stronger dollar is generally a negative for commodity prices based on export considerations. Again, what's really operating in this market is the correlation between the currencies and the oil market. The correlation is roughly 82%. Fundamentals of supply and demand are not driving prices. It's apparent that supplies are more than adequate to meet demand. The other feature to this market is momentum trading. Money flow in crude oil remains positive. Money flow in heating oil is negative. Money flow in gasoline remains positive.

 

 

                                                                Support                                     Resistance

Aug Crude                                             65.50                                                71.50 

Aug Heat                                               172.50                                             186.50

Aug Gas                                                180.00                                            195.00                                                               

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METALS

                                                                     Last                                              Last Week     

Aug Gold                                                    932.5                                              939.70

July Silver                                                  13.86                                               14.32              

Oct Platinum                                              1168.6                                         1209.00            

 Metals were driven by several, disparate forces over the course of the last week.  When the World Bank came out and stated that the current recession is worse than their original projection and also worse than the projection by the International Monetary Fund, the metals sold off sharply. When it seemed likely that the Federal Reserve will leave interest rates unchanged and indicate in a communiqué that they were not inclined to raise interest rates anytime soon,  the dollar showed weakness and the metals rallied. At this point, it's difficult to develop a market consensus regarding recession, deflation, inflation or even central bank policies. The market was surprised on Wednesday when the Swiss came in and apparently intervened against their own currency by selling it. This drove the Swiss almost 300 points lower intraday. As for the Fed, in a relatively optimistic communiqué, short-term rates remained unchanged. They also went on to say that they would stay the course regarding rate policy. They also suggested that the pace of economic contraction is slowing. Additionally, household spending is showing signs of stabilization and that   inflation was likely to remain subdued for some time. They also didn’t refer to deflationary pressures. There are those who remain concern about the Fed's monetization of debt which will probably lead to potential inflationary pressures eventually. After all, the stimulus of $12.8 trillion is unprecedented and historically  stimulus has always led to eventual inflationary consequences. Money flow for gold is positive. Money flow for silver is negative.

 

Over the past week, platinum futures dropped to a three-week low as a demand for the metal edge against inflation declined.

 

                                                             Support                                      Resistance

Aug Gold                                             915.00                                            946.50

July Silver                                            13.50                                          14.55                           

Oct Plat                                               1155.00                                       1190.00

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SOFTS

                                                                       Last                                     Last Week

Sept Coffee                                               119.25                                          120.85

Oct Sugar                                                  17.10                                             15.95

 

                                                          Support                                   Resistance

Sept Coffee                                                    116.50                                     121.00

Oct Sugar                                          15.80                                        17.50

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                                                                  Last                                    Last Week

Nov Soybeans                                        10.08                                            10.50

Sept Corn                                                3.95                                            4.162      

Sept Wheat                                             5.676                                          5.946

Wheat continued to decline in value over the past five sessions. Signs that the winter wheat crop in Kansas will be larger than expected was a negative. Dry weather is enabling farmers to accelerate the harvest that had been delayed by spring rains. Yields are much better than industry observers had previously anticipated.

Separately, there was a report that wheat prices in the past had been inflated by index investors. A US Congressional investigation report suggested that the Commodity Futures Trading Commission should enforce position limits to curb speculation. The report went on to suggest that index traders pushed futures beyond the limits of normal supply and demand. The report went on to say that speculation by index funds trading in wheat resulted in increased costs for farmers, merchants, grain processors and end-users. The CME group disagreed with the congressional findings, however.

 

                                                          Support                                    Resistance

Nov Soybeans                                        9.70                                        10.23

Sept Corn                                                3.85                                          4.05

Sept Wheat                                              5.60                                         5.86

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.