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Gasoline stocks are seen as being tight

WEEKLY FUTURES REPORT

04.27.11

Filed 8:30 pm

Last Last Week

June Crude 113.25 111.38

June Heat 325.65 323.33

June Gas (Blended) 337.45 324.25

Crude oil popped to a two week high as the EIA report showed a drop in gasoline stocks. Stock levels for gasoline are at their lowest levels since August of 2009. Distillate stocks also declined by 1.81 million barrels to 146.5 million barrels. The only negative in the report which momentarily drove prices lower was an increase of 6.16 million barrels of crude on rising imports. On the cusp of the driving season, gasoline stocks are seen as being tight. Profit margins are fat enough for refiners to ramp up crude purchases to process gasoline. Crude prices are higher by 37% from year ago levels. Gasoline is at price levels not seen for three years. Gasoline demand was higher week on week but lower by 1.6% from year ago levels. Refinery operating levels were higher by 0.2% to 82.7% for the latest reporting week. Oil also traded at better levels as the Federal Reserve left short term interest rates unchanged at 0.0 to 0.25% for the "foreseeable future." Federal Reserve Chairman Bernanke in an unprecedented news conference went on to articulate that Fed policy is to support the ongoing moderate recovery with monetary policy. The Fed Chairman also continues to believe that inflationary pressures such as higher oil prices are transitory which may be a questionable assumption which, in eventual retrospect, may prove to be a questionable assumption. His comments also further weakened

the US dollar, particularly against the EC. Oil is higher by 23% for the year. Money flow for crude oil remains positive. The weekly inventory report had traders buying gasoline and selling it against heating oil as seen in the chart below.

Support Resistance

June Crude 110.00 115.00

June Heat 316.50 328.00

June Gas 322.50 340.00

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METALS

Last Last Week

June Gold 1529.00 1502.50

May Silver 48.29 45.24

July Platinum 1832.00 1806.80

The gold market was powered higher by a weakening dollar and multi-level investment demand. The Euro zone crisis continues while Euro Zone industrial production continues to improve, thanks to Germany. The Federal Reserve left short term rates unchanged and continues to view inflationary pressures as transitory. The facts seem to indicate that rates of inflation in India and China are considerable. As long as rates of riskless return in China are so far below the implied rate of inflation, the gold market will continue to drive to higher levels. Gold should have relatively clear sailing until the end of June when the Fed’s stimulus program known as QE 2 (quantitative easing) comes to an end. At that point, this buyer of first and last resort with unlimited resources will stop buying, supply will exceed demand and interest rates should rise inducing profit taking in gold, a non interest rate bearing asset. Just before that happens, the dollar decline should be disorderly, stocks will be soaring past reasonable valuations and crude oil will be approaching $130 a barrel. Also, expect S+P to lower debt ratings on several European nations driving more buyers into gold.

The key development in silver over the past week was yet another increase in margin requirements by the Comex exchange which triggered a momentary $2.50 cent crater. This decline was all but eradicated by Wednesday. The margin increase wasn’t punitive but simply a function of higher prices for the underlying commodity.

Support Resistance

June Gold 1485.00 1542.00

May Silver 43.05 45.00

July Plat 1775.00 1850.00

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SOFTS

Last Last Week

July Coffee 296.40 294.90

July Sugar 22.96 23.53

Coffee was lifted by the weak dollar trade on Wednesday as well. Tight coffee supplies continue to be the central supportive feature to this market. Too much intractable demand is chasing too little premium quality coffee.

Sugar remains fixed in a downtrend with a clearly defined channel. Lack of strong demand in the physical market has been the storyline for several months. Other markets with more speculative promise have driven traders away from the sugar market. India may offer unrestricted exports to world buyers and this helped depress prices.

Support Resistance

July Coffee 270.00 305.00

July Sugar 2220 2600

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Last Last Week

July Soybeans 13.844 13.692

July Corn 7.592 7.404

July Wheat 8.12 8.206

Prices were higher but were constrained by ideas of increased acreage becoming utilized in the key growing state of Iowa. Also, Chinese demand being less than expected also held back further price advances. China may be well supplied with soybeans at this time. Technicians believe that the recent soybean rally may have left the market in an overbought condition and consolidation is warranted. Also, Argentinian beans are coming onto the world market and this is hanging over the market. Money flow in soybeans is positive. Money flow in corn is positive. Weather models suggest a band of wet weather moving through key growing regions and this could delay plantings for the next ten days, a price positive. This may result in a shift from corn to soybeans. Money flow in wheat is positive. Of course, all these price advances are seen through the dollar. As seen through the EC, prices have not advanced at all.

Support Resistance

July Soybeans 13.50 14.07

July Corn 7.48 7.81

July Wheat 8.00 8.62

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.