HELPING FUTURES TRADERS SINCE 1997

WEEKLY FUTURES REPORT

8.01.12

Filed Thursday at 8:05 am

ECB leaves rates unchanged

                                     Last                       Last Week (7.25.12)

Sept Crude                  88.88                          89.00

Sept Heat                   285.66                         284.73

Sept Gas (Blended)   283.26                        272.41

For the latest reporting week, The EIA report stated that crude stocks declined by 6.5 million barrels while gas stocks declined by 2.2 million barrels and distillates declined by 1 million barrels. This enabled prices to stabilize ahead of the ECB meeting on Thursday. Oil had traded lower going into the Federal Reserve’s FOMC meeting on Wednesday in the belief that the central bank would not act to stimulate the economy through another round of quantitative easing. Weaker readings for the Chinese and Australia Purchasing Managers Indices gave further credence to the idea that world economies are slowing and oil demand is generally weaker. Still, on Tuesday night the American Petroleum Institute stated that crude stocks had declined by 11.6 million barrels, the most since September 2008. Unless the ECB comes up with some sort of credible attack to address the sovereign debt problem in Europe on Thursday morning, oil should remain under pressure with prices capped at 90. Prices had rallied 3.7% recently but are lower by 11% for the year. China’s PMI fell to 50.1, below market expectations and the lowest reading in eight months. A price positive for the complex was the continuation of sanctions against Iran. OPEC output dropped to 393,000 barrels to an average of 31.165 million barrels, down from 31.558 million barrels a day in June. Iran’s production is at a 22 year low due to the sanctions being imposed on them.  A supportive feature for the complex continues to be the ongoing conflict in Syria. Nearby gasoline supplies are tight with refinery shutdowns.

Technically, crude is in a neutral position. It is not overbought in terms of RSI and stochastics, after turning over, are flattening out.

Gasoline appears to be the strongest of the three charts.

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METALS

                                             Last                                    Last Week

Dec Gold                            1603.30                               1612.70

Sept Silver                          27.345                                  27.285

Oct Platinum                      1397.80                              1399.60

The metals sold off sharply early during Wednesday’s session as longs finally embraced the idea that the Federal Reserve wasn’t about to unleash a fresh round of liquidity injections into the market. Absent this stimulus, the metals fell back on themselves, especially silver. Ultimately, The Fed left rates unchanged and failed to suggest additional quantitative easing in the immediate future. The ECB convenes on Thursday morning and traders

are looking for some sort of substantive action such as the ECB entering the market to buy debt aggressively, expand its balance sheet and drive down rates in the process.

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SOFTS

With the Eurozone Purchasing Managers index contracting for the 11th consecutive month, the macro picture continues to deteriorate. The UK PMI came in with its worst showing in 3 years. All these data points suggest demand erosion for a product such as coffee. Dry weather in Brazil is a price negative. Brazil will come in with its best crop in history. Supplies are tight in Vietnam even as exports from Sumatra have increased.

As for the chart, prices are below the mid Bollinger band. The threat is to the downside.

Sugar prices have consolidated and inclined lower over the past five sessions. Problems with weather in Brazil have become a non factor. Sugar needs an improvement in European demand to take values higher. Weather concerns have already been baked into the price.

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GRAINS

Sept Wheat       8.794            9.032

Even with the worst drought in the US in nearly 50 years, soybeans and corn are little changed in price when compare to last week at this time. Grain cargoes are at their lowest levels in 19 years. Global grain trade will be lower by almost 5% from last year at this time. Higher grain prices have led to demand destruction. Shipping activity may contract by as much as 30% over the next twelve months. Corn inspections in US ports are down 19%. This is the worst drought since the 1950’s. Weather is also a problem in the Black Sea region. In fact, temperatures from Italy, across the Black Sea and into the Ukraine averaged about 95 degrees. Global grain production is down about 3.1%. The market continues to be concerned about the weather pattern for August with some models calling for above normal temperatures for 16 to30 days. Futures trading has contracted in terms of open interest as traders look for further guidance form the USDA.

As for the charts, soybeans had a considerable break but hel the mid Bollinger. Price attempts to make a new high but stochastics fail to follow.

Wheat is the weakest of the charts.