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Crude zipped to a two week high after the inventory news

WEEKLY FUTURES REPORT

05.25.11

Filed 8:45 pm

Last Last Week

July Crude 101.19 100.24

July Heat 299.30 291.93

July Gas (Blended) 299.20 292.60

Crude oil zipped to a two week high after the Department of Energy showed that inventories of distillates (which includes heating oil and jet fuel) fell to their lowest levels in two years. Distillate stockpiles fell by 2.04 million barrels to 141 million barrels. At the same time, demand was higher by approximately 10% to 3.98 million barrels a day. Gasoline stockpiles rose by 3.79 million barrels to 209 million barrels. This was the biggest build in gasoline inventory since February. Crude prices closed at their best levels since May 10th. The odd thing about these numbers is that we are beyond the end of the home heating oil season and on the cusp of the driving season. Where did this demand for distillates come from? 10% in a week? The trade was looking for the distillate number to come in at unchanged levels from the prior week. The trade was also looking for a rise of 450,000 barrels in gasoline stocks. Trade sources may suspect that cash distillate demand may be temporary and never intended for delivery. Crude supplies rose 616,000 barrels to 370.9 million barrels. The trade was looking for stockpiles to decrease by 1.5 million barrels. Refinery runs were higher by 3.1% to 86.3%. Another positive was the call by Goldman Sachs which said that they were turning more bullish on the commodity space and suggested being long copper, crude and zinc. The OECD is maintaining its forecasts for world economic growth. OPEC is expected to leave its production quotas unchanged at the upcoming June 8th meeting in Vienna. They believe that there is enough oil to meet current demand. Also the fact that Ahmadinejad of Iran will not preside over the meetings throws the balance of power back in terms of production levels and quotas to the more moderate Saudis. Money flow for crude is negative but could flip with more accumulation on Thursday. The same

is true for Heating Oil and Gasoline. Traders will now have to come to an estimation of world economic growth, whether it is expanding or contracting for this is what will truly determine the pricing of oil in a sustainable way.

Support Resistance

July Crude 95.50 102.50

July Heat 281 300.00

July Gas 281.50 304.50

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METALS

Last Last Week

Aug Gold 1526.2 1497.10

July Silver 37.815 35.22

July Platinum 1785.00 1771.90

Worries over Greek debt restructuring or a lack of same has transformed gold back into a currency more than a precious metal. The dollar has been generally stronger over the past week but this has failed

to have influenced the gold negatively. Also, Goldman Sachs made a recent call for higher commodity prices going forward and this of course was a gold positive even though the call was more centered on oil. Against this, world stock markets have been under general selling pressure with the exception of Wednesday’s rally. Durable goods orders came in weaker than expected for the United States but there was a better than expected upward revision for the prior month. Consumer sentiment figures in Germany came in lower than expected. Gold options for June expired on Wednesday and this gave an added spin to the market as traders like to at least attempt to close the market at a well traded strike price so strangles (short puts and calls) at that strike price go off the board worthless. Money flow in gold is positive.

The path of least resistance and silver over the past several sessions has been to the upside. Problems regarding the euro zone debt situation and in Greece in particular have under pinned prices. Continued tightening by the Peoples Bank of China to slow growth there and to increase bank reserves may have a negative effect on silver but then again if Chinese banks come under scrutiny this could drive investment money into metals.

Support Resistance

Aug Gold 1508 1538

July Silver 35.08 40.00

July Plat 1753 1800

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SOFTS

Last Last Week

July Coffee 264.85 270.05

July Sugar 22.64 22.85

Coffee continues to come under selling pressure. Traders are looking for cash market tightness and some sort of short covering to help hold support levels and for buying to eventually kick in. Recent dollar strength has been a negative. Euro zone debt problems and no clear solution for Greece is a negative for this market as well. Commercials seem to be buyers on any sort of decline however. Higher coffee prices are being passed through to the consumer and this may negatively impact demand. Roasters look at the recent price declines as being good buying opportunities. Brazil’s main crop looks to be in good shape for the beginning of the harvest.

The sugar market continues to do battle with negative outside forces. The year ahead could result in more than adequate supply. Projected

strong demand from China and projected strong ethanol demand are positives. Speculators are still too long this market, however. Production from Thailand is also expected to be at record levels.

Support Resistance

July Coffee 260.00 273.00

July Sugar 2110 23.00

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Last Last Week

July Soybeans 13.77 13.794

July Corn 7.422 7.496

July Wheat 7.964 8.17

Technically, soybeans are positive and recent price action and reversals suggest a test of around $14.00 is in the cards. Money flow in soybeans is positive. Traders are looking for a sudden shift in weather from wet and cool to hot and dry over the next 10 to 14 days. If the weather changes this radically it would not be good for crops that have already been planted but it would allow more new corn and soybeans to be planted. Soybean prices may benefit from a greater than expected corn crop.

Money flow in wheat is negative. Last week’s sharp rally should drive prices into overhead resistance. Supplies from India and Russia are better than expected. Wet weather in Canada has delayed planting there. Planting progress in North Dakota is also said to be slow. Russia says that it’s willing to lift its export ban and become a more aggressive exporter of wheat as early as the beginning of July.

Corn remains positive and money flow is positive as well. Look for a test of previous highs due to wet weather and delayed planting. Corn on its pullbacks around the 725 area held very well. Fund traders have been on the sell side while commercial demand on pullbacks has been good. Speculators remain too long this market however. The potential for a sluggish world economy is a negative but a stronger US dollar plus weather conditions in Europe are preventing traders from establishing large short positions. Weather models in the United States continue to call for wet weather delaying planting then very hot and dry weather; a non-optimal combination.

Support Resistance

July Soybeans 13.32 13.90

July Corn 7.12 7.70

July Wheat 7.55 8.50

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.