HELPING FUTURES TRADERS SINCE 1997

WEEKLY FUTURES REPORT

9.12.12

Filed at 8:30 pm

                                     Last                             Last Week (9.05.12)

Oct Crude                    96.79                             95.84

Oct Heat                      320.71                           313.00

Oct Gas (Blended)      298.86                           296.23

Oil was modestly lower on Wednesday but higher over the last five sessions. The Department of Energy reported that there was an unexpected increase in crude inventories. For the latest reporting week, crude stockpiles rose by 1.99 million barrels. Market observers believe that there is just too much supply at these levels to maintain price. Over the past week, crude production increased to 5.53 million barrels a day. Previously, production had declined to 5.49 million barrels a day due to the disruption of Hurricane Isaac. Refineries were running at 84.7% of capacity, their lowest level of productivity since April. Fuel use decreased by 2.6% to an average of 18.7 million barrels a day, the biggest decline is daily usage since September 2008. Gasoline consumption fell by 1.7% to 9 million barrels a day. Demand remains weak while geopolitical factors underpin the market with continued tensions in Egypt, tragedy in Libya with the killing of the US Ambassador and calls by Israel for the US to preemptively move against Iran to derail its nuclear capability. Gasoline inventories were lower by 1.18 million barrels to 197.7 million barrels, the lowest level since October 2008. The market was also supported by the idea that the Federal Reserve will inject more liquidity into the system through quantitative easing. German courts ruling in favor of the legality of German participation in the European Stability Mechanism was a positive. Money flow in crude is positive, positive in heating oil as well but negative in gasoline. The current structure of the market suggests spreads. The market continues to be wary of releases from the Strategic Petroleum Reserves. Crude looks to have good resistance just above 98.00 a barrel.  Heating oil remains well bid and the strongest of the three components.  Gasoline looks overextended.

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METALS

                                           Last                                    Last Week

Dec Gold                             1733.70                              1696.00

Dec Silver                            33.34                                  32.30

Oct Platinum                      1648.40                              1572.50

Gold was well bid on the idea of forthcoming further stimulus by the Federal Reserve and by cooperative efforts in Europe in dealing with the sovereign debt crisis. A positive was the ruling by the German courts on the legality of the participation of Germany in the ESM. A generally lower dollar and the EC at a four month high was supportive for gold. The market is now awaiting the details of stimulus. Will the Fed be buying Treasuries, mortgaged backed securities or will they wait for more information. Many in the market are anticipating that the Fed will announce that they will keep rates through 2015. Meanwhile, labor unrest in South Africa is sending platinum prices higher. Two mines have been struck so far. The situation looks as though it can defy resolution for a protracted time. As for the complex as a whole, look for “buy the rumor, sell the news.”

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SOFTS

                                  Last                             Last Week

Dec Coffee                 177.50                         160.60

Oct Sugar                   19.72                            19.01

Massive short covering sent coffee prices higher. Macro conditions are improving. The El Salvador crop is reportedly 37% below last year’s levels. This should be offset by the Columbian crop, however. Open interest remains high which means that there are more shorts in the market that need to cover. Look for a test of 190. The market has traded lower to adequately reflect a world production surplus. Weather in Brazil has allowed for a near perfect harvest. Chinese production levels are said to be 10% better than year ago levels and consequently that country is expected to scale back imports moving forward.

                              Support                       Resistance

Dec Coffee               160.00                          190.00

Oct  Sugar                 18.88                             20.50

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GRAINS

Soybeans rallied on the release of the crop report but money flow tells a different story beneath the surface of price action. Money has been pouring out of soybeans. The rally on Wednesday was the best in three weeks. The lingering effects of the season long drought will reduce yield more than previously anticipated. At the same time, corn continued to trade to lower levels as the same report suggested that harvest will yield more than traders anticipated. US soybean production should come in at 2.634 billion bushels, the smallest crop in nine years and 14% below last year at this time. In terms of money flow however, money has been pouring out of the soybean market. Money flow for soybeans, wheat and corn is uniformly negative.