Crude rallies sharply on greater than expected gasoline supplies while the
dollar falls against most major foreign currencies
Weekly Futures Report
Filed Wednesday 3:15 pm
ALL CHARTS THIS WEEK ARE 60 minute bars
(with one exception)
Dec XRB (Blended Gas)
Crude oil rallied sharply on Wednesday
after the release of the report from the Department of Energy which indicated
that gasoline supplies fell by a greater than expected 2.2 million barrels.
The drawdown was greater than the median expectation of market watchers. Crude
also rallied as the dollar fell against most major foreign currencies and the
stock market rallied on better than expected earnings reports. The drawdown in
gas stocks suggested to some that consumer demand was improving. Over the past
several weeks, refiners had allegedly been cutting back on buying crude due to
decreased profit margins and the idea that demand was soft as well as seasonal
considerations. The fact that there was a drawdown in gasoline suggests that
refiners will have to ramp up their buying. On this news, heating oil and
gasoline were up 2% on the day. Short covering was also seen across the board
in all three major energy markets. The Euro Currency traded above 1.50 for the
first time since August of 2008. Crude stocks were actually higher by 1.3
million barrels to 339 million barrels, the highest level since August. The
trade had been looking for an increase of 1.5 million barrels. The less than
expected build in stocks was also viewed as a positive. Money flow remains
positive for all three markets.
Longer view/mkt has potential to reach 85
on retracement from highs
Gold rallied on Wednesday to reflect a
surge in crude oil prices and continued pressure on the dollar against most
major foreign currencies. The dollar index dropped to a 14 month low. As of
1:00 pm in NY, even will all the volatility seen in surrounding markets, gold
was trading at the same price as last Wednesday at this time while silver was
10 cents under last week at this time while Platinum was a respectable $8
higher. As long as the Fed is willing to let short term interest rates stay at
or near zero and as long as the Fed shows no inclination to withdraw the
massive stimulus it has applied to attempt to revive the US economy, gold will
continue to find buyers on sell offs as a de-facto currency. On the side of
caution, the fact that gold has been reluctant to move higher over the past
week indicates that buying interest may be drying up, all buyers may be
committed and profit taking may be featured shortly. Hedge funds and
speculators are holding record long positions so long liquidation shouldn’t
surprise anyone given the current dynamic structure of the market.
Last Last Week
Coffee fell on Tuesday by the most in
almost weeks basically on profit taking as prices had reached a 13 month high.
In addition to speculative profit-taking there was some hedge selling as well.
Coffee had been up as much as 13% in just October, registering the biggest
monthly gain since last May based on a weak dollar. Also coffee was bought as
it’s a prominent member of an asset class seen as a hedge against inflation.
On Monday coffee reached its best trading levels since September 5, 2008.
Money flow in coffee remains positive.
India, the world's second largest producer
of sugar, raised its crop forecast for the latest production season. India
produced about 15 million tons of sugar last year, 44% less than a year
earlier due to drought considerations. Sugar has doubled in price this year.
Going forward, better-than-expected rains in India over the past two months
will help boost production. Over the past year the monsoon season produced 23%
less rainfall than usual. Even though it's the second-largest producer, India
will still import 1.5 million to 2 million tons of raw sugar this year mostly
from Brazil, the world's largest producer. Money flow in sugar remains
Last Last Week Jan Soybeans
Wheat rallied to a 10 week high as the
dollar lost ground against major foreign currencies. The EC rallied to a 14
month high against the dollar and this factor alone helped to lift most
commodity markets. Wheat was up almost 16 cents going into the closing hours
of trade on Wednesday. Short covering was seen across the board. Money flow on
wheat remains positive.
Corn advanced to a three-month high as
rains delayed the US harvest. Cold weather also was a problem for harvesters.
About 17% of the corn crop was in by October 18. This compares with 28%
harvested at this time last year. The weaker dollar also supported prices.
Soybeans flew up the charts on Wednesday
to keep pace with the gains seen in corn and wheat and to mirror the eroding
purchasing power of the declining dollar. Soybeans have enjoyed a serious
rally since the beginning of October when prices were as low as 8.86. With
prices now stand at 10.09 and the relative strength of the market is edging
towards 70 (currently at 62.7). Should prices spike into psychological
resistance at 10.50, caution would be warranted.
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.