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CRUDE OIL MARKET FUNDAMENTALS: July crude oil traded higher during the early morning hours, helped by general strength in most risk-assets and upwardly revised price target on crude oil from a major Wall Street firm. Another factor that could be providing a level of support comes from recent NATO attacks on Tripoli, which are reported to be the largest ever. Reports overnight from a well-respected Wall Street firm cited growing emerging market demand as a factor cutting into supplies, as well as compromised OPEC spare capacity limiting supplies. There also seemed to be talk regarding the Euro zone debt crisis and that the recent plunge in commodities like crude oil could be overdone. Countering that view were warnings overnight from Moody’s Ratings, suggesting that a Greek debt default could negatively impact other European countries. The other focus in the crude oil market is the June 8th OPEC meeting, and whether the cartel decides to increase production quotas. There were reports overnight that the Saudi’s state run oil firm was considering tapping back into their first oil find that represents about 500 million barrels of the countries proven reserves. This could be taken as a sign that the country is looking for ways to boost production and capitalize on higher crude oil prices. In the meantime, open interest in WTI crude oil continued to decline and fell for the 7th session Friday. This decline has trimmed nearly 135,000 contracts (8.1%) since reaching record extremes on May 11th. Meanwhile, crude oil prices have hovered around those same levels indicating that the recent trade is one of distribution. July crude oil continues to consolidate the early May breakdown, with resistance above at the $101.00 area and support below at 96.00. The early advantage goes to the bull camp this morning, with the next resistance coming in at $100.42.
GASOLINE: July RBOB prices broke out to a new 3 session high during the initial morning hours and seemed to embrace forecasts for higher crude oil prices ahead. That optimism follows the latest government report on pump prices, which recorded their largest weekly decline since the financial crisis. While prices fell over $0.11 last week, they remain more than a $1.00 above year ago levels. It is possible that a portion of Monday’s late day gains came in response to the closure of a major gasoline refinery in Canada, and that could be lending a level of support again this morning. The refinery glitch, along with problems at an Illinois refinery fueled sizeable gains in the Chicago cash gasoline market. The bulls have the edge to start with the next upside hurdle standing at $2.97.
HEATING OIL: July heating oil prices took a brief turn below Monday’s inside day range overnight but has since reversed higher. This reflects a level of bullishness for July heating oil and favors more near term upside toward $2.9280. It appears that heating oil prices have found support on the back of an optimistic forward outlook for crude oil as well as a modest rebound in a number of physical commodity markets. It is also possible that heating oil has drafted upside momentum on the potential for greater diesel imports to India this year, as the country makes a switch from fuel oil to subsidized diesel. Meanwhile, the price action in July heating oil remains range-bound inside a triangle, with resistance at $2.9534 and $2.8395 below. The bulls have the early edge this morning, with the next upside resistance at $2.9534.
TODAY’S GUIDANCE: July crude oil is on a positive track this morning, perhaps from an upgraded price target from a major bank and a lack of fresh negatives on the Euro zone debt situation. The analyst upgrade could gain further attraction as the day unfolds, as it was the same firm that advised clients to take profits in crude oil near the April peak. July gasoline showed some resilience during Monday’s downdraft, and that could be a factor that reasserts itself in today’s session.
Energy: Positive Track This Morning; Higher Target by Major Institution
by Dave Hightower on May 24, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
CRUDE OIL MARKET FUNDAMENTALS: July crude oil traded higher during the early morning hours, helped by general strength in most risk-assets and upwardly revised price target on crude oil from a major Wall Street firm. Another factor that could be providing a level of support comes from recent NATO attacks on Tripoli, which are reported to be the largest ever. Reports overnight from a well-respected Wall Street firm cited growing emerging market demand as a factor cutting into supplies, as well as compromised OPEC spare capacity limiting supplies. There also seemed to be talk regarding the Euro zone debt crisis and that the recent plunge in commodities like crude oil could be overdone. Countering that view were warnings overnight from Moody’s Ratings, suggesting that a Greek debt default could negatively impact other European countries. The other focus in the crude oil market is the June 8th OPEC meeting, and whether the cartel decides to increase production quotas. There were reports overnight that the Saudi’s state run oil firm was considering tapping back into their first oil find that represents about 500 million barrels of the countries proven reserves. This could be taken as a sign that the country is looking for ways to boost production and capitalize on higher crude oil prices. In the meantime, open interest in WTI crude oil continued to decline and fell for the 7th session Friday. This decline has trimmed nearly 135,000 contracts (8.1%) since reaching record extremes on May 11th. Meanwhile, crude oil prices have hovered around those same levels indicating that the recent trade is one of distribution. July crude oil continues to consolidate the early May breakdown, with resistance above at the $101.00 area and support below at 96.00. The early advantage goes to the bull camp this morning, with the next resistance coming in at $100.42.
GASOLINE: July RBOB prices broke out to a new 3 session high during the initial morning hours and seemed to embrace forecasts for higher crude oil prices ahead. That optimism follows the latest government report on pump prices, which recorded their largest weekly decline since the financial crisis. While prices fell over $0.11 last week, they remain more than a $1.00 above year ago levels. It is possible that a portion of Monday’s late day gains came in response to the closure of a major gasoline refinery in Canada, and that could be lending a level of support again this morning. The refinery glitch, along with problems at an Illinois refinery fueled sizeable gains in the Chicago cash gasoline market. The bulls have the edge to start with the next upside hurdle standing at $2.97.
HEATING OIL: July heating oil prices took a brief turn below Monday’s inside day range overnight but has since reversed higher. This reflects a level of bullishness for July heating oil and favors more near term upside toward $2.9280. It appears that heating oil prices have found support on the back of an optimistic forward outlook for crude oil as well as a modest rebound in a number of physical commodity markets. It is also possible that heating oil has drafted upside momentum on the potential for greater diesel imports to India this year, as the country makes a switch from fuel oil to subsidized diesel. Meanwhile, the price action in July heating oil remains range-bound inside a triangle, with resistance at $2.9534 and $2.8395 below. The bulls have the early edge this morning, with the next upside resistance at $2.9534.
TODAY’S GUIDANCE: July crude oil is on a positive track this morning, perhaps from an upgraded price target from a major bank and a lack of fresh negatives on the Euro zone debt situation. The analyst upgrade could gain further attraction as the day unfolds, as it was the same firm that advised clients to take profits in crude oil near the April peak. July gasoline showed some resilience during Monday’s downdraft, and that could be a factor that reasserts itself in today’s session.
Tags: Crude, Energy, Heating Oil, RBOB
About Dave Hightower