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Oil rallied to its best level in a month
WEEKLY FUTURES REPORT  
Filed remotely at 1:20 am  
2.08.12    
  Last Last Week (02.02.12)
Mar Crude 99.04 97.34
Mar Heat 320.33 305.51
Mar Gas (Blended) 298.27 288.75

Oil rallied to its best level in a month after the release of the weekly release of the supply and demand figures from the US Dept. Of Energy. The report stated that supplies increased less than previous expected. Another positive was an increase in refinery runs reflecting better tone to demand. Crude stocks for the latest reporting week increased by 304,000 barrels, far less than the consensus expectation for a build of 2.5 million barrels. Refiners also increased East Coast gasoline production reflecting good demand. Brent crude in London advanced in price even more than West Texas Intermediate. Crude ended the session at its best price since Jan unary 30th. Brent crude ended the session at its highest level since last summer. The spread between Brent and WTI widened by 67 cents today. Gasoline was higher by over 4 cents or1.6%. Crude oil supplies rose by 339 million barrels. Refiners are operating at 82.8% of capacity. Gasoline inventories rose by 1.63 million barrels to 231 million barrels last week. Traders were looking for an increase of 875,000 barrels. Distillate supplies increased by 1.17 million barrels. Total fuel demand declined by 0.5 percent to 17.6 million barrels a day, the lowest level since 1999. The reason for elevated price levels isn’t due to supply and demand but can be directly related to concerns over Iran. On February 6th, President Obama ordered a block on all Iranian assets and on its central bank. Iran may block the Straits of Hormuz which sees the transport of 1/5th of the world’s oil production as retaliation against these sanctions.

A higher close on Thursday would flip the intermediate trend to positive for crude oil while the charts for both products look far more positive.

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  Support Resistance
Mar Crude 96.00 101.00
Mar Heat 314.80 322.40
Mar Gas 289.00 303.20

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METALS    
  Last Last Week
Apr Gold 1734.4 1748.50
March Silver 33.945 33.82
April Platinum 1667.00 1619.50

Metals turned in a mixed performance with gold lower on the week, silver higher. China’s gold imports from Hong Kong fell by 62% in December as jewelry demand plunged. November’s purchase of 102.8 tons was a record high. The setback in prices seen in December was seen as creating a new climate of demand as the new year got under way. Gold production increased by 32% in December. The main catalyst for higher metals prices continues to be the zero interest rate environment. The probability of this environment continuing thought the end pf 2014 as stated by the Fed after the last Federal Open Market Committee meeting was thrown into question by the strength of the latest unemployment report but as the dollar continues to show weakness against most major foreign currencies with the exception of the Yen, the metals look poised to test overhead resistance.

  Support Resistance
Apr Gold 1709 1766
March Silver 33.09 34.82
April Plat 1636 1685

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SOFTS    
  Last Last Week
Mar Coffee 220.05 214.10
Mar Sugar 24.48 23.59

Tuesday saw a sharp rally in coffee. A weak dollar and strong equity markets were positive outside forces. There is hope for a workable resolution to the Grekk debt crisis while at the same time strong job creation numbers in the US were seen as a positive. The strength of the rally can be partially explained by the fact that prices are exploding out of 13 month lows. Tight near term supplies also inspired short covering. A large crop looming on Brazil overhangs the market, however.

As China restocks sugar supplies, prices have risen. The world sugar surplus is already embedded in the price so any alterations to the demand picture will send prices higher. Although prices have been in a tight trading range since November, open interest has expanded by 200,000 contracts; something’s got to give. Volume can precede price. News that China will stockpile 1 million tons of white sugar will be supportive against any price decline.

    Support Resistance
Mar Coffee 210 240
Mar Sugar 23.04 2516
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    Last Last Week
Mar Soybeans 12.314 12.152
Mar Corn 6.424 6.42
Mar Wheat 6.606 6.742

Soybeans traded higher in price thanks to a weaker dollar which improves export prospects and better macro economic indicators. US unemployment improvement was a positive for the market. The Nikkei trading at a three month high was an outside market positive. Optimism towards a Greek debt deal was another positive influence. South American soybeans production may not be as robust as previously thoguth and this is a price positive.

Corn continues to consolidate. Slackening demand fr om the US ethanol industry is a negative.

Cessation of some Russian wheat exports due to weather concerns should have been supportive for prices. The fact that it didn’t is a negative. Better moisture levels in key growing areas is a negative. If the wet trend continues to be beuilt into weather models, expect further price erosion.

Support Resistance

Mar Beans

Mar Corn

Mar Wheat

Chuck Kespert from NY/NY

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