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Oil fell again over the past five sessions

Market News




Filed 8:07 am 5.24



Last                       Last Week (5.16.12) July Crude     89.90                                         92.73

July Heat                  281.55                          289.58


July Gas (Blended)  280.15                          285.51


Oil fell again over the past five sessions as inventory reports form the US Department of Energy indicated that stockpiles were at a 22 year high. Crude stocks were higher by 883,000 barrels to 362.5 million barrels for the latest reporting week. He trade was looking for an increase of 1.65 million barrels. Gasoline stocks fell by 3.3 million barrels to 201 million barrels. The trade was looking for a decline of 650,000 barrels. Distillate stocks fell by 309,000 barrels to 119.5 million barrels. The trade was looking for a decline of 500,000 barrels. As the session wore on, oil trimmed its losses but still finished significantly lower on the session. A main catalyst for these lower prices continues to be the concern over Greece and the stability of the European Union. European leaders are gathering tonight in Brussels to continue to discuss ways to address the sovereign debt issue. Another price negative was that Iran has agreed to allow UN inspectors into the country to examine their nuclear program. As far as the meeting in Brussels, it appears that France and Italy are in agreement in proposing a Euro bond to generate more capital for stimulus and to recapitalize banks. The Germans have so far resisted this action. Of course the problems in Europe have led many to believe that recessionary pressures will take the price of oil lower. At the same time, the international Energy Agency will have access to Iran’s Parchin military complex. The US and its allies believe that Iran has worked on the development of a nuclear trigger at this complex. Another negative for oil was the forecast for a contraction in Chinese growth this year.  Money flow remains negative for the oil complex and although prices are oversold, sharp rallies will be sold into.


Now for the charts…


Downside channels remain intact but expect sharp rallies which fail to sustain.






July Crude






July Heat






July Gas















Last Week


June Gold






July Silver






July Platinum






Gold basically aligned itself with the dollar over the past five sessions. It did rally from the lows on Wednesday as traders allowed for the belief that Euro finance ministers would commit themselves to do more proactively to avoid a European credit event. The 2 year German Bund traded below 2% as demand for safe haven assets trumped other assets. Fears of a Greek withdrawal from the EU has seen 4 trillion dollars in valuation vanish from world equity markets.  Late session gold buyers were also inspired by the idea that China wiling to jump start their economy through spending on infrastructure. The negative for gold included the fact that the dollar was at its best levels in 20 months. Also, gold jewelry demand in India may decline by as much as 40%. The dollar is up 4.3% for the month while gold is down 1.2% for the year. It is interesting to note that even with all the extreme volatility in recent days, gold and silver are both higher than last week at this time. In other words, gold seems to be in the process of hammering out a bottom. Speculators seem to be out of this market as holdings in the DPDR Gold Trust continue to decline. This is a positive for the market as this fact seems to suggest that gold is underinvested at this point in time.


Gold is fitfully pounding out a bottom. Of course it’s using a $70 dollar range to do it, but the market is now constructing a foundation to rally from.


Support                               Resistance


June Gold




July Silver






July  Plat













Last                             Last Week


July Coffee               166.90                                178.00


July Sugar                19.51                                   20.73

Coffee sank to a 21 month low on concern that Europe’s debt crisis will result in demand contraction. Market observers are forecasting that supply will outstrip demand by 5.3 million bags. While Columbia’s crop continues to improve, the Brazilian real continues to devalue against the dollar. It’s now trading at a three year low to the dollar. Coffee has dropped 26% in price this year. It is the worst performing commodity of all that are tracked by the Goldman Sachs commodity index.


Sugar traded at its lowest level since August 2010. India’s rupee is trading at record lows. They are the second largest exporter of sugar in the world. The devaluation of these currencies just makes their exportable product that much cheaper as producers become more desperate to forward sell their crops before their valuation drops further.






July Coffee






July Sugar






********************** **********************


                                  Last                       Last Week


July Soybeans                 13.654                         14.22


July Corn                         6.046                            6.20


July Wheat                       6.682                           6.386


Fears of a contraction in the Chinese economy and a slackening demand sent grains generally lower with the exception of wheat. Weather models prompted soybean selling. The expectation is that rain will hit key growing areas and relieve crop stress due to dryness. Macro considerations also prompted long liquidation by fund managers. With wetter weather soybean yield expectations should rise. 

Macro considerations for corn are negative. Weather models suggest rain relief. Fund managers were liquidating long positions at the beginning of the week. China may hold off until September to initiate corn buys as they are willing to see the development of their own crop at this time.

 Wheat rallied on the speculation of unseasonably hot weather over key growing regions. The heat will push crops that much closer to harvest due to the early plantings of spring. 9% of the crop is in, compared to 50% last year,


              Support                     Resistance

July Beans




July Corn






July Wheat