Mixed environment this morning. US Dollar, while weaker, remains near the upper end of the last month’s trading range. Corn is supported by planting progress figures from some areas. The energy market will be looking at inventory numbers and further news out of the delta region. The path of least resistance seems to be lower. Gold and Silver fighting continued liquidation with inflation fears abating.
Tag Archives: Crude
Grains Look at USDA Report and Energies to EIA Stocks
The grain markets will be looking at today’s USDA Supply & Demand report with particular focus on the first numbers for the new crop year. Energy complex will be paying close attention to the weekly energy stocks report from the EIA. If gasoline stocks get below the 200 million, it signal some significant tightening.
Liquidative Tilt; OPEC Indicates Production Cuts; Planting Windows May be Opening
Broad based selling in most physical commodities. OPEC indicating production cuts will be coming which can signal they are starting to see demand destruction. Grains are in a negative posture with planting windows opening up and the US dollar not hitting new lows. Silver seems to be leading the metals down.
Saudi’s Concerned Crude Too High; Crop Forecast Warmer & Dryer
After an 8 day $5.21 run in Silver, it’s not surprising to see some “back-and-fill” action. The FOMC meeting today and tomorrow ending with the first ever press conference with expected positive comments on the US economy. Expect significant volatility in the grain markets as weather models change causing additional planting concerns.
Dollar Lowest Since ’09; Trade Watching Petroleum Inventories; Weather Pusning Grains
Positive vibe across most markets this morning. Energy Markets will be looking at gasoline stocks and implied demand from the EIA today. Gold hit new all time highs over night. Brazil to be shipping more beef to China which may lead to a reduction in corn exports because of increased feed demand. Corn areas are receiving more rain which could delay plantings, and wheat areas are not receiving need moisture.
Video: Early Update – 2011.03.07
Middle East uncertainly headlines dominate as we start the new trading week. The decent non-farm payroll numbers from last week seem to be all but forgotten. Announcements out of China state the government will curb inflation by either raising bank reserve requirements or outright interest rate hikes. They have also stated their intention to continue building reserves of various commodities.
Energy Market Commentary – 2011.01.03
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CRUDE OIL MARKET FUNDAMENTALS: February crude oil prices traded higher during the first session of 2011 and overcame the $92.00 area in early morning action. The positive upside action comes in the face of a stronger US dollar and seems to be the result of a round of positive economic data that continues to suggest that the global economy is on the mend. Chinese PMI data released overnight came in slightly below expectations, and that seems to be taken as a signal that the Chinese may pair back their efforts to further contain inflation. Recent data out of Russia indicated that their total 2010 oil output increased slightly more than expected to a new record level, but the threat of increased supplies has done little to derail this morning’s upside pursuit. Perhaps crude oil is getting further support from OPEC’s recent comments that the global market was well-supplied and does not require an increase in OPEC output. Meanwhile, the first trading day of 2011 brings the chance of new fund money coming into crude oil, and that could be a factor that continues to support prices in the near term. While economic data continues to support a rebound in global growth, that helps to keep crude oil focused on $100/barrel price targets. However, there are some analysts who suggest that the upside in February crude oil could be the result of speculation, which could be highlighted in today’s COT positioning report. While the pricing structure for most of the nearby crude oil contracts remains normal and does not show any drastic changes in demand, the extreme net long spec positioning during last week’s COT report and increase in open interest since then suggests that the specs added to their long positions during the recent week. The focus is likely to turn back to this morning’s US manufacturing data that is expected to show an expansion in activity during December, and that has the potential to become another positive for crude oil pricing this morning. The bulls have the upside advantage with the next upside targeting coming in at $92.60.
GASOLINE: February RBOB prices traded higher during the early morning hours but remained trapped inside of Friday’s wide range advance. Nonetheless, the bull camp remains in charge with their sights set on a retest of $2.4555. While a round of positive economic data delivered a favorable boost to the demand outlook for energy, it is possible that gasoline has also garnered a measure of support from surge in Chinese car registrations to meet with the country’s new quota system. This comes as China surpassed the US as the largest car market in the world. The recent action in RBOB prices has caused a minor shift in the intra market spreads that has put the nearby calendar spread into a backward pricing structure, and that indicates some minor tightness entering into the market. The bulls have the upper hand to start with the next upside coming in at $2.4555.
HEATING OIL: February heating oil appears to be the upside leader within the crude oil complex this morning as it posted a fresh 52-week high. Heating oil prices have extended their gains after an impressive bullish outside day reversal on Friday which puts the bulls in control. While this morning’s Purchasing Managers’ data from China came in slightly under expectations, it seemed to fan hopes that the central bank could take a less-aggressive stance on fighting inflation, and that is seen as a positive. Meanwhile, the National Weather Service released their latest forecast for US heating demand that is expected to be 0.5% above normal levels during the upcoming week despite a more than 4.0% decline US heating oil demand. While February heating oil has shown impressive upside in recent sessions, it has also reached overbought levels and is currently testing upside channel resistance, and that leaves the market in a vulnerable spot without some fresh demand positive data.
TODAY’S ENERGY MARKET GUIDANCE: The crude oil complex kicks off 2011 with an impressive upside showing, supported by a number of positive outside market developments. The combination of a positive sweep of global economic readings and expectations of further fund money coming into the market to start the year continues to support. However, there is concern whether current pricing truly reflects the current supply and demand balance, and whether the recent upside has more to do with speculation or true fundamentals. We have to give the bull camp the edge to start, but remain skeptical of more upside without fresh demand positives.
Crude Oil Strategies – 2010.12.20
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The energy complex seems to be having trouble rising above the $90.00 price level for nearby crude oil, and that is probably a function of recent strength in the Dollar and also because the overall global economic outlook seems to have downshifted slightly over the last month. Apparently refinery margins reached a high enough level that US refiners felt comfortable in expanding their output, as the US refinery operating rate jumped by more than 7% in just two weeks.
It should also be noted that crude oil saw its spec and fund net long position carve out a new record in the December 7th COT reports. With the threat of rising Chinese interest rates, ongoing turmoil in the Euro zone and less than stellar employment activity in the US, one might suggest that crude oil is a sub-$85.00 item instead of a $90.00 item. With the US refinery operating rate in the December 15th EIA report showing yet another increase, to 88%, and rising above the 5 year average for the first time since late September, it does not seem like the market will be overly sensitive to minor product supply issues. Therefore, we see crude oil prices above 88.85 basis the February contract as overvalued, and we suspect that prices are capable of temporarily dipping down to the $84.20 level at some time before the end of the year.
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Energy Market Commentary – 2010.11.29
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CRUDE OIL MARKET FUNDAMENTALS: January crude oil prices traded higher overnight and broke out to their best price levels since November 16th. Positive developments out of the Euro zone regarding an Irish Bailout package was applauded and seemed to boost overall risk taking sentiment. Further outside market positives come from expectations of a robust ‘Black Friday’ turnout, along with positive retail sales action forecasted for ‘Cyber Monday’. Additionally, some traders noted that increased call option activity in some of the later 2011 crude oil contracts could be a factor supporting talk for $100 crude oil in the future. Meanwhile, the US Dollar broke out to its best levels since late-September, and that could be a factor that has limited some of January crude oil’s initial upside potential this morning. Furthermore, heightening tensions over the Korean Peninsula continued to escalate with the latest comments from South Korea noting further retaliation will be seen on any further North Korean attacks, and that is seen as a factor that could hamper future demand expectations in that region. January crude oil broached $85/barrel earlier this morning and has since backed-off from that level as excitement surrounding the bailout package has subsided. The short term trend in crude oil prices favors more upside, with the next close in support at $84.00, and then again at $83.10.
PRODUCT MARKET FUNDAMENTALS: GASOLINE: The combination of short term supply glitches within the US gasoline market along with positive macroeconomic developments has fueled an upside breakout in January RBOB pricing. There remains some uncertainty surrounding when the Enbridge 6A pipeline will be back in full capacity, and that is seen as a factor that could disrupt Canadian supplies into the US. Additionally, there was news Sunday of an Exxon Los Angeles 150,000 barrel per day refinery impaired by an unplanned closure, which could provide support to cash gasoline markets on the west coast. The near term gasoline contracts remain at a price-premium to their distant contracts, and that continues to foster a tight supply and demand landscape within the market that in turn could support higher prices. The technical action in January RBOB prices provides the bull camp with the edge this morning, and further price weakness down toward $2.1600 (that holds) could present a buying opportunity. Key downside support for this short term uptrend lies at $2.1430.
HEATING OIL: January heating oil established new 8-day price highs early this morning, as it seemed to benefit from news of the bailout package for Ireland. Additionally, talk of colder than expected temperatures in both the US and Europe is seen as factors that could boost distillate demand. However, talk of easing supply concerns in China also seemed to weigh on various spread relationships and detract from the mostly optimistic market tone. Meanwhile, price action in January heating oil looks supportive for another upside push above $2.36. The bull camp has downside support below at the $2.3350 area, which has the potential prop up prices.
TODAY’S ENERGY MARKET GUIDANCE: The bull camp benefits from a series of positive macroeconomic factors, but continued strength in the US dollar could be a concern.
Energy: In the Process of Recovering From Recent Rout
by Dave Hightower on May 17, 2011
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CRUDE OIL MARKET FUNDAMENTALS: Overnight pressure in the crude oil market seemed to come from economic slowdown fears, ongoing Eurozone credit challenges and prospects of another weekly inventory build. The crude oil market may have also come under pressure from early strength in the US Dollar. However, it seemed that sentiment began to shift in favor of the bulls during the early morning hours. Perhaps the effects of fires in Alberta Canada that forced a number of oil companies to close operations, potentially disrupting supplies, could be offering up a degree of support. While that news seemed to offer little support Monday afternoon, it could become a supportive factor in the near term. During Monday’s action, it appeared that the plunge in June RBOB to a new 2 month low was a force that weighed on crude oil prices. It is possible that the early gains in June RBOB this morning are offering up a measure of support for crude oil. There were also reports this morning indicating that the Chair of Libya’s National Oil Corporation was missing, and that maybe taken as a sign that Gaddafi forces are slowly falling apart. By and large, July crude oil appears to be in a wait and see pattern, as Eurozone debt woes circulate and US inventories are expected to show another weekly build. Expectations for this week’s EIA inventory report are for US crude oil supplies to post their fourth consecutive gain, with estimates ranging from 1.0 to 1.3 million barrels. The price action in July crude oil continues to grind lower, with Monday’s decline coming on a pullback in volume. The grind lower has defined a trading range with topside resistance at $101.20 and support below at $95.78. The intermediate term trend favors the bear camp for another push lower, but it probably takes another setback in risk appetites from disappointing headlines out of the Euro zone or soft US economic data to drive trade lower today.
GASOLINE: After making a lower low overnight, June RBOB prices appear to be in the process of rebounding. June RBOB slide below the $3.00 level Monday and reached its lowest level in 2-months, as flooding fears along the Mississippi River receded. US cash gasoline prices in the Gulf came under pressure Monday following the US Army Corps of Engineers decision to open the Morganza spillway, and that is a key decision that could help nearly 12% of US refining capacity from closing. As the fears of flooding receded, there seemed to be liquidation in the cash market from traders who stocked-up on supplies of gasoline and heating oil ahead of the potential flooding. Meanwhile, consensus estimates for this week’s EIA inventory report call for a build in the range of 1.0 to 1.25 million barrels. This would mark the second build in a row. The market will also be paying attention to demand figures to gauge the impact that higher prices, which were in the range of $3.3850 to $3.0220 during the report window. In fact, there were signs of demand destruction with the latest data out of Italy that showed the country’s demand for refined fuel products declined by over 1.5%, largely in response to a drop in auto gasoline demand. The technical outlook for June RBOB has reached oversold levels after the latest 5 day slide that has trimmed $0.50 in value. It is possible that June RBOB could garner a measure of support from the 100 day moving average below at $2.8967. Short term resistance comes in at $3.02.
HEATING OIL: June heating oil prices punched down to a new 7-day low overnight and managed to close the May 9th gap in the process. The positive rebound from that support level and subsequent move back into positive territory this morning provides the bulls with the short term edge. The cash market trade for distillates bounced during Monday’s sell-off in the future market, which favors an upside rebound in the session ahead. Expectations for this week’s EIA inventory report are for distillate stocks to show a gain in the range of 250,000 to 500,000 barrels. The short term trend in June heating oil favors the bear camp, but a move back above resistance at $2.94 would change that stance. The early morning rebound from a new 7-day low provides the bull camp with the early advantage.
TODAY’S ENERGY MARKET GUIDANCE: The crude oil complex appears to be in the process of recovering from the recent rout. June RBOB is the weakest of the group and largely responsible for dragging the complex lower Monday. The overnight move into a lower low and successful rebound provides the bull camp with upside potential. June heating oil seems to have the cleanest pattern, with a successful test of gap support and upside reversal. Near term targeting in June heating oil comes in at $2.9400.