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Crude hit 30 month high as NATO airstrikes continue

WEEKLY FUTURES REPORT

04.06.11

Filed 7:45 pm

Last Last Week

May Crude 108.58 104.22

May Heat 318.38 305.30

May Gas (Blended) 318.39 305.80

Crude oil hit a fresh 30 month high on Wednesday as NATO airstrikes continued in Libya. Over 198 missions were scheduled to be flown over Libya today. Fears that supplies from Libya will be temporarily lost for a more extended time period than previously thought put more upward pressure on the market. As for the weekly supply/demand report, the US Department of Energy reported that crude stocks for the latest week were higher by 1.95 million barrels to 357.7 million barrels. The trade was looking for a gain of 2 million barrels. Supplies in Cushing, Oklahoma, the terminus for West Texas Intermediate, the US benchmark, were lower by 16,000 barrels to 41.9 million barrels. Gasoline inventories fell by 357,000 barrels to 216.7 million barrels. The trade was looking for a drop of 1.9 million barrels. Gasoline demand dropped by 1% over the past week and is lower by 1.3% from year ago levels. There is the possibility that demand destruction has modestly begun to appear in the marketplace. Of the three components, gasoline was the most decidedly bearish. One negative element for the complex was the unexpected interest rate hike by China as they seem to be committed to dampening inflationary pressures. Usually such a move, given the current price of oil, would take a dollar out of the price almost immediately. The fact that the market didn’t really flinch in the face of this new development suggested just how well bid the market is. Brent crude is up nearly 7% over the last five days. Until the situation in Libya gains greater clarity, the market will retain its fear premium. Gasoline is advancing on increased open interest which is a technical positive. China may move to raise retail prices to accomplish two things,

to curtail demand and to encourage refiners not to export stocks. Heating Oil is trading at its highest levels since 2008 and actually weather continues to be a factor for this market as below seasonal temperatures persist in the densely populated Northeast US. Money flows for crude, heating oil and gasoline all remain positive. More oil commentary below.

With the slackening demand for gasoline and the growing demand in the Midwest for diesel, the heat/gas spread has probably bottomed as seen in the chart below.

Support Resistance

May Crude 107.00 109.25

May Heat 312.00 327.50

May Gas 312.50 325.00

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METALS

Last Last Week

June Gold 1461.60 1425.40

May Silver 39.55 37.45

July Platinum 1797.0 1769.70

Gold traded at new record highs on Wednesday while silver changed hands at a 31 year high. Minutes from the latest Federal Open Market Committee meeting minutes continue to suggest that the Federal Reserve views current inflationary pressures as transitory and that they will probably keep interest rates at artificially low levels until the end of the calendar year. At the same time, the ECB is thought to be on the verge of raising rates. Continuing inflationary pressures in China are being viewed as a gold market positive. Consumer prices in that country are higher by more than 5% for year ago levels. Also, the current budget impasse in Washington is being framed as a gold market positive. Ongoing concern over the Euro zone debt crisis is a gold market positive. The ongoing conflict in Libya is yet another gold market positive. Money flow for both gold and silver remain positive. Based on bigger time frames gold projects to 1542 by mid-summer. Although obviously overbought, silver has yet to indicate a topping formation. Until it does, it remains a Yogi Berra market and the trend is your friend until the bend at the end.

Support Resistance

June Gold 1419.70 1474.90

May Silver 37.59 40.12

July Plat 1777.00 1820.00

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SOFTS

Last Last Week

July Coffee 267.90 267.40

July Sugar 24.97 25.23

Although coffee remains fundamentally bullish, technical studies suggest that more money has left this market recently than entered it. Money flow for both coffee and sugar remain negative. Coffee exports

from Vietnam are expected to be less than previously forecast but this may be in part to weaker demand. The fact that coffee is not reflecting the weaker dollar and the rallies seen in precious metals is a negative.

Sugar has been under consolidation for three weeks. Supply/demand metrics are still bearish. Index funds may be waiting on the sidelines with buy tickets in hand, however. Current supply remains tight. China’s sugar production is lower by 5% from year ago levels. An improving supply picture has pressured prices.

Support Resistance

July Coffee 249.50 280.00

July Sugar 26.00 29.10

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Last Last Week

July Soybeans 13.882 13.826

July Corn 7.704 6.71

July Wheat 8.182 7.632

Soybeans have been marking time since last week punctuated by a three day selloff that left the market near term oversold. Weather looks favorable for the Brazilian harvest period. Cash market values were weaker there. Crop production is coming in higher than expected. Higher short term rates in China were a negative. Ending stocks should be slightly lower than previously forecast. Technically, ease of movement is turning negative. As for corn, tight ending stocks have been a support to this market. Front month futures pushed to a life of contract high. Monthly supply/demand report on Friday will obviously impact prices. Wheat has surged recently and is due for a period of consolidation. The ban on wheat exports from India should be lifted. Money flow in soybeans and wheat is negative. Money flow in corn remains positive.

Support Resistance

July Soybeans 13.64 14.10

July Corn 7.54 7.87

July Wheat 8.04 8.34

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.