Weekly Futures Report
Crude oil shook off early selling after the dollar became weak again
Filed 7:59 am Thursday
Last Last Week
Sept Crude 71.72
Sept XRB (Blended Gas)
Oil retreated from a seven week high after the government released its
inventory report on Wednesday morning. The Energy Department report showed a
greater than expected increase in crude supplies. Crude stocks now sit at a
five-week high. Refinery runs also fell to 84.5%, the lowest level in more
than two months. The reason that the refiners have to drop their utilization
levels is because there’s just too much product available. For the latest
reporting week, crude stocks rose 1.67 million barrels versus an expected
600,000 barrel build. Gasoline stocks are down 2.18 million barrels versus an
expected drawdown 800,000 barrels. Distillates are also down 1.136 million
barrels versus an expected build of 122,000 barrels. To some degree, the
drawdown in crude stocks was offset by the increase in products. Also, crude
oil shook off early selling after the dollar became weak again. Crude oil and
the dollar still maintain an 82% correlation. Despite the daily noise, crude
inventories remain at historic levels while demand remains slack. The
technical picture however remained strong. There is the idea that the US
economy is coming out of recession demand for energy will be higher. The
reality is that the economy is probably entering a protracted period of slow
growth and excesses in the supply/ demand ratio of crude oil have yet to be
worked out. The market will be very sensitive to Friday's employment figures.
The price differential between London crude and West Texas intermediate crude
continues to be a bullish influence on the market.
Last Last Week
Dec Gold 965.30
Sept Silver 14.68
Gold really took its cue over the past week from technical price
breakouts in the major currencies against the US dollar. Also higher prices
for equities, actually the highest levels of the year, proved to be support
for gold. Breakouts in the euro currency and the British pound supported gold.
Additionally, belief that the recession is over for the US economy encouraged
a renewal of risk appetite and this spilled over into gold. Volume remains
very light, however. It's partially a function of summer but it's also a
function of short covering. In the bigger view it's difficult to see gold
maintaining higher levels for an extended period of time unless the dollar
continues to remain weak.
Last Last Week
Coffee also continued to rally on the back of a weak dollar. As prices
continued to rise, Vietnam is gearing up to increase exports to a new high for
the year. The market sold off however when news hit the wires that US service
industries contracted at a faster pace than expected. This may indicate that
demand may contract as more jobs were eliminated from the US economy than
economists had previously speculated. Overall, coffee is up 17% on the year.
Money flow in coffee remains positive. In terms of the chart, coffee looks as
though it is running out of upward momentum and a significant retracement from
high to low has occurred and that profit taking should be expected if the
market sees further job loss with Friday's unemployment numbers.
Sugar rose to its highest levels since 1983 in London trading. Monsoons
in India have been termed deficient and as a result Indian production will be
less than expected. Because of this the global deficit in sugar is expected to
continue. The key growing region in India has cut its forecast of 4.6 million
metric tons compared to last year’s crop of 9.1 million tons. Lack of producer
selling is also encouraging higher prices. Money flow continues to be
positive. Looking at the chart, it's too early to call a major top.
Last Last Week
Nov Soybeans 10.32
Soybeans had been firm in price but profit taking set in on the
expectation that exports from the United States will slow and domestic
inventories will build. A noted trade house stated that inventories in the
United States should rise to 259 million bushels, an increase from the current
estimated stockpot of 95 million bushels. Money flow in soybeans remains
positive, however. The chart indicates that soybeans will come over and
resistance at 1050 and, as with many markets, prices rebounded significantly
from the highs of the early June to the lows of early July.
Corn also had rallied until a major trade observers reported that US
output of corn will rise significantly as yields surpass estimates. Current
production is speculated to increase 12.5 billion bushels, up from 12.1
billion bushels. Corn could reverse on Thursday on a close below 3.46.
Wheat was under selling pressure over last several sessions due to
speculation that increased rainfall in Russia and North America will continue
to boost production levels. Wheat is the weakest performer in the grain
complex. Money flow will reverse its intermediate trend to negative if the
market closes below 529 on Thursday.
Sept Corn 3.28
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.