WEEKLY FUTURES REPORT

03.23.11

Filed 9:15 pm

Last Last Week

May Crude 105.55 98.95

May Heat 306.70 300.47

May Gas (Blended) 302.50 285.03

Crude oil traded to new recent highs then backed off as players

calculated the consequences of the latest Department of Energy

report concerning weekly supply and demand. Traders were also

attempting to quantify the usage implications in the aftermath of

the Japanese earthquake, tsunami and damaged nuclear reactor.

Crude oil rose earlier in the session on the continuation of air

strikes by coalition forces against Libya. The focus then turned to

Japan, the world’s third largest economy and third largest

consumer of oil. Japan is considering a post war style agency of

reconstruction. The upward bias in oil is based on the situation in

Libya which has the largest proven reserves of sweet crude in

northern Africa. Saudi Arabia said that it would attempt to make

up for any drop off in production but the Saudi product is sour

crude, not as desirable. April crude came off the board yesterday

and there was some expiration pressures associated with that. On

the other hand, there isn’t any clear sign when Japan will begin its

massive reconstruction effort. Recently, the International Energy

Agency said that even it would need more time to determine the

exact contraction in Japanese demand. Crude futures have rallied

24% since protests in Libya commenced on February 15th. The

entire region remains in turmoil with protests and regime change in

many countries including Algeria, Bahrain, Iran, Oman, Syria and

Yemen. Traders continue to ignore some bearish fundamentals

such as ever increasing supplies in Cushing, Oklahoma and a

massive decline in oil use by Japan. As for the Department of

Energy, crude inventories for the latest week rose by 2.13 million

barrels to 352 million barrels. The trade was looking for an

increase of 1.5 million barrels. Gasoline inventories fell by 2.4

million barrels, the fifth weekly consecutive decline. Heating oil

declined on profit taking. Heating oil is higher by 45% year on

year. Gasoline stocks are at an 11 week low. Demand, even with

higher pump prices, is 1.2% higher than last year at this time.

Heating Oil was lower as stockpiles were higher by over7 million

barrels and demand was lower by 3.6 %, the lowest level in 3

weeks. On this news the Heat/Gas premium declined by almost 3

cents. This spread had exploded after the Japanese earthquake. See

three hour spread chart below.

Support Resistance

May Crude 100.99

107.20

May Heat 302.50 313.70

May Gas 296.50

305.80

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METALS

Last Last Week

April Gold 1438.00 1396.10

May Silver 37.365 34.47

Apr Platinum 1758.30

1700.50

Gold continued its advance as Central Bank injections

of liquidity continued to surface as gold buying as a

hedge against the inflationary impact from those very

same injections. Many money managers are looking at

the prospect of hyperinflation as a result of central

bank monetary policy. Some depict the world as awash

in liquidity. Continued turbulence in the Middle East

and Bank of Japan liquidity injections as well as

continued concern over the European debt crisis drives

buyers into the precious metals. Gold on a balance sheet

is not viewed as a liability. Portugal failed to pass the

austerity measures that were recently proposed and

their prime minister said that he would resign if there

wasn’t passage. Gold was up 30% last year as pension

funds, money managers and individuals sought

diversification and chased returns NA nine interest rate

return environment. Chinese and Indian jewelry

demand reached record highs last year even with higher

prices to fabricators. Market observers see gold demand

eventually becoming viral and triggering a manic,

bloody denouement. With some many negative cross

currents going in the world it’s difficult to argue against

holding a gold position in that its advance has thus far

been orderly. Eventually, there will be $150 dollar an

ounce swings in the market, much like a suspension

bridge in high winds, which will presage a multi month

top.

Support Resistance

April Gold 1388.80 1463.50

May Silver 33.72 38.05

Apr Plat 1730.50 1770.00

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SOFTS

Last Last Week

May Coffee 268.60 265.35

May Sugar 26.58 25.85

Ethanol prices in Brazil went absolutely parabolic over

the weekend and this should divert sugar production. In

some areas ethanol rose by as much as 20% in one

week. Also heavy rains in Brazil have cut back on sugar

production which in fact may be delayed until early

May because of conversion to ethanol. A combination of

skyrocketing prices and shortages of ethanol will result

in this dislocation. Stocks of hydrous ethanol may dry

up the by mid-April. This type of ethanol is used in flex

fuel cars. Hydrous ethanol jumped to $4.33 a gallon

while anhydrous soared to $7.38 a gallon, not exactly

cheaper alternatives to hydrocarbons. Brazilian

infrastructure has also been damaged by storms.

Support Resistance

May Coffee 260.00 300.00

May Sugar 25.50 28.50

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Last Last Week

May Soybeans 13.512 12.734

May Corn 6.81 6.164

May Wheat 7.142 6.82

Hedge buying continues to drive the price grains higher.

There is a strong case at this point in time for players to

buy insurance by going long the grains against possible

supply disruptions and bad weather going into the

planting season. Food inflation continues to be a big

issue in the minds of speculators, hedgers and endusers.

Corn stockpiles remain low while wheat

inventories look a little bit better. Corn/wheat spreads

should be considered because of this. Wheat was up

47% last year due to bad weather, droughts in Russia

and flooding croplands in Canada and Australia. Corn

is projected to be the strongest performer due to

emerging demand from China. Also, higher oil prices

are dictating increased corn demand to turn that

product into ethanol. China is importing more corn

than it has in the past 15 years. See the corn/wheat

pread chart below.

Support Resistance

May Soybeans 13.36 13.80

May Corn 6.68

6.86

May Wheat 6.956 7.412

Chuck Kespert from 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.