Filed 10:35 am Thursday
Last Last Week
Sept Crude 65.05
Sept XRB (Blended Gas)
Crude oil was under pressure on Thursday morning on a concern over
increased supplies and also in response to an increase in US weekly jobless
claims. The market did attempt to rally as existing housing sales came in
better than expected. Gasoline and heating oil inventories rose last week, the
sixth consecutive increase. Crude oil supplies fell however according to the
US Department of Energy. Demand continues to be weak. Crude in storage is at
the highest level it's ever been. In terms of pricing, the market is factoring
in an economic recovery for the second half of the year. Many analysts don't
see that on the horizon, however. While China continues to stockpile
commodities such as copper and oil, Japan's imports fell 19% in June. Japanese
refiners and utilities have cut output. Many market observers believe that the
price of crude is not truly and accurately reflective of supply and demand
considerations. They believe that the oil complex has become something more
than just the oil complex. It has been elevated to an asset class and given
the same consideration as stocks and bonds by money managers. If this
consideration of being an asset class were removed from the oil complex is
believed that crude oil be trading around $45 rather than the current level of
$65. One of the favorite plays of those with very deep pockets is to buy crude
oil, store it and sell differed futures contracts against it many months out.
Even given the storage costs, this trade locks in a near double digits return.
According to the US energy Department, crude stocks dropped 1.8 million
barrels to 242 million barrels. This was less than an expected decline of 2.1
million barrels. Gasoline supplies climbed to 813,000 barrels to 215 million
barrels, and the highest level since the middle of April.
Another factor to crude oil trading has been a direct link to the US
stock market. If stocks rally, the path of least resistance is higher. If
stocks decline, crude oil more often than not loses value as well.
Last Last Week
Aug Gold 952.80
Sept Silver 13.71
Oct Platinum 1178.30
After trading higher in the beginning of the week, the gold market
drifted through testimony of Federal Reserve Chairman Bernanke on Capitol
Hill. This testimony was balanced, not particularly optimistic nor pessimistic
and really didn't give traders much to work with in terms of developing a
theme to trade against. Short-term interest rates have backed up a little bit
which is a market negative while the stock market has remained positive. The
dollar has been consecutively weaker and stronger against major trading pairs.
Also, volume has been very light. Trading in December futures has been very
choppy, all over the place. October platinum is even worse in terms of trading
continuity. Part of this can be attributed to the time of year but another
consideration is a lack of consensus regarding economic strength or weakness
Last Last Week
Sept Coffee 121.60
Oct Sugar 18.09
Sugar rallied on Thursday to a one week high as traders believe that
reduced supplies would not be enough to satisfy demand. Indian production
seems to have declined and when thrown into the mix of world production, many
are looking for a world production deficit. Production in Brazil has slowed
due to excessive rains. India has turned into a net buyer of sugar. Because of
that, exports are expected decline 40%.
Coffee continues to trade higher despite the fear that demand is slack.
Last Last Week
Nov Soybeans 9.162
Sept Corn 3.164
Sept Wheat 5.256
Soybeans continue to edge higher. Dry soil in the Midwest is a price
positive. In key growing regions, rainfall is 25% less than normal. The top 18
soybean growing states, 44% of the plants have flowered compared with 62%
which is the five year average.
Corn continues to trade under pressure due to a bumper sized crop. There
is a fear that the US Department of Agriculture may lower its production
estimates after Argentina, the world second-largest exporter, saw its
production drop by 40%. Also the USDA is still estimating the impact of cold
wet weather that delayed planting. Still supplies will be more than adequate
to meet demand.
Wheat also traded lower, to its worst levels in two weeks on the idea
that the Kansas winter crop will be greater than expected. Also, potential
trading restrictions in wheat trading acted as a negative for price.
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.