Oil climbed the charts for a second day Wednesday as traders covered shorts and placed long hedges against potential supply disruptions coming out of a tropical storm gaining strength in the Gulf of Mexico. The industry funded American Petroleum Institute stated that crude inventories fell by 2.97 million barrels for the latest reporting week. Players are expecting that the Department of Energy report to be released Thursday, delayed by a day due to the Labor Day holiday Monday, will show surpluses of two million barrels as Tropical Storm Lee curtailed output. Yesterday’s advance took prices back to the best levels since August 3^rd. Gasoline stocks according to the API were lower by 871,000 barrels. Traders are expecting the Department of Energy to show a decline of 1.4 million barrels. The API and DOE numbers correlate 71% of the time. It’s been estimated that 36% of the US oil production and 18% of natural gas production had been curtailed in the wake of Tropical Storm Lee. Oil was also supported ahead of President Obama’s Thursday night speech which will stress job creation. Players are awaiting a draw in crude stocks Thursday as a result of storm activity in the Gulf and lost production from Libya. Libyan production is at 45,000 barrels a day, down from 1.59 million barrels a day. Also, oil was supported on a stock market rebound Wednesday. As the market seems to invariably decline when the President speaks, be prepared for a selloff.

As for the charts…

Short term overbought with a flat Bollinger band suggests a near term selloff for the crude.

Charts seem more constructive for the products, however.

Oct Gas                                                       278.00                                         300.00

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Gold fell on Tuesday as the Swiss National Bank addressed their currency problems by establishing a minimum exchange rate against the EC. This immediately took the Swiss lower by 10 big handles or over $13,000 per single futures contract. The buyers of Swiss as a flight to safety currency are the same buyers who are long Gold and this record selloff in the Swiss induced aggressive selling pressure in gold just after it had made a fresh nominal high above $1920 an ounce. Another negative was the defeat of a constitutional challenge in Germany seeking to bar that country from participating in European Central Bank bailouts. Another negative was the perception of a double top formation above 1920. Another negative was a sharp rebound in stocks on Wednesday from a three day selloff prompted by pressure on European banks.

As for the charts…

Top Bollinger is flat with bottom Bollinger rising and stochastics are weaker at the second high supporting the case for a selloff.

Platinum is the weakest of the three charts.

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Coffee finally broke from its inexorable price rally even as studies indicate growing coffee consumption in the US, particularly from single cup machines. A stronger dollar as a result of the sharp selloff in the Swiss was a price negative for the coffee market. Vietnamese exports could be 20% higher than last month at this time. The rally is still intact but the steepness of the speed line of the rally has left the market vulnerable to selloffs due to outside market forces.

Sugar closed lower on Wednesday. The weakness of the close is expected to induce more speculative long liquidation. The market continues to look at a significant world surplus in the coming year. Thailand’s exports may be 50% greater than last year.

As for the charts…

Rally still in tact, just the steepness of the advance left vulnerabilities to the downside.

Sugar remains a sideways, lower affair.

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Deteriorating crop conditions have helped to support values. Supply tightness is another market positive. Stronger dollar a negative influence. Chinese demand seems constant. A risk aversion stance by many money managers after the sharp drop in the Swiss and gold and dollar strength resulted in some liquidation of long positions.

As for the chats..

Normal pullback to the median band looks more than just probable.

Crop conditions remain a concern. 52% of the crop is in good condition against a reading of 69% last year. High prices have slowed demand for US corn. As for the chart… The market has formed a pennant and suggests a breakout of the flag to the upside.

As for wheat, a slow US export market and a large crop from Russia and the Ukraine have kept prices under pressure. Wheat remains highly calibrated to currency valuations and a stronger dollar will work against US exports going forward. The Ukraine could export 10 million tonnes this year compared to just 4 last year. World buyers are still attracted to Russian wheat on a price comparison basis. Chart suggest a short.