Tag Archives: Oil

Soybeans: South American Rain in 6-10Day Key.

by on January 13, 2012

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NEAR-TERM MARKET FUNDAMENTALS: Outside market forces are looking slightly negative today. A weak demand tone for the USDA clashed with short-term positive demand news to helped the market see a strong recovery off of the early lows yesterday. March soybeans were down 53 cents early in the session yesterday but managed to rally 37 1/4 cents off of the early lows to late session highs. The USDA data was mostly bearish across the board but especially for the corn market and a limit-down move in corn helped to drive soybeans sharply lower. US soybean production came in at 3.056 billion bushels, up 10 million from previous estimate. Ending stocks, however, were pegged at 275 million bushels as compared with trade expectations looking for 233 million. Exports were revised lower by 25 million and crush down by 10 million. Without a serious drop in South America production, the USDA was in a position to drop usage and the increase in production and lower usage fell directly to the bottom line. World ending stocks for the 2011/12 season came in at 63.43 million tonnes as compared with 64.54 million last month. December 1st soybean stocks came in at 2.366 billion bushels, up 42 million from trade expectations. Weekly export sales for soybeans came in at 434,200 tonnes. Sales of 296,000 metric tonnes are needed each week to reach the USDA forecast. Net meal sales came in at 47,600 tonnes which was below trade expectations and compares with sales of 99,000 tonnes needed each week to reach the USDA forecast. Net oil sales came in at just 1,100 metric tonnes which was also lower than expected. As of January 5th, cumulative soybean oil sales stand at 31.7% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 42.0%. Sales of 10,000 metric tonnes are needed each week to reach the USDA forecast. On top of the weekly sales, private exporters reported to the USDA export sales of 414,000 tonnes of US soybeans to unknown destination. The USDA news was negative but traders believe that the market would not be down as much as it was except for the outlook for improving weather in South America in another 8-9 days after heavy rains in the past few days. Traders will be closely monitoring weather forecasts in South America for direction as a return to a hotter and drier condition could cause further production losses while a shift to a wetter pattern would hold down losses. South Korea bought 55,000 tonnes of South America meal. India vegetable oil imports for December totaled 669,000 tonnes, down 22%. China officials want to raise self sufficiency in edible oils with an output target for domestic production at 24.4 million tonnes by 2015 from 20.1 million tonnes this season.

TODAY’S GUIDANCE: The South America crop conditions improved with the soaking rains this week and there is follow-up rains in the forecast for late in the 6-10 day period. This rain window will be important and could mean the difference between continued weak demand for US soybeans or a jump in demand as buyers shift away from South America if production concerns pick-up.

TODAY’S MARKET IDEAS: The technical action is weak. March soybean resistance is at 1191 1/4 with 1174 3/4 and 1158 as support. Look for 1158 to 1191 range for now.

Energy: Technicals Positive but Overbought

by on October 7, 2011

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CRUDE OIL MARKET FUNDAMENTALS: November crude oil established a higher high during the early morning hours and climbed back above the $83.00 level. However, a slight pullback in risk appetites, modest profit-taking ahead of today’s September US jobs data and concerns whether this week’s $8.00 rally might be over extended weigh over the market. The price action in November crude oil this week seems to reflect a pullback in fears that the global economy would fall back into a recession, and that leaves this morning’s jobs data as a factor that needs to meet or beat expectations to drive the market higher. Confirmation of US jobs added above the 75,000 level is likely to open the door for November crude oil toward the $85.00 to $87.00 area. In the meantime, there was more chatter out of Iran this morning indicating that most OPEC members would likely leave OPEC production targets unchanged at their December meeting. There were also reports out of Russia overnight indicating that oil refiners in the region might not be able to survive export duty reforms “if” they do not modernize. That is a longer term factor for the market, but something that could gain more traction in the weeks ahead. There has also been talk that index fund rebalancing for 2012 could see weightings on US WTI crude oil to fall and increase for Brent crude oil. While this is a factor that could put downside pressure on US crude prices, a lot can happen in the current environment in 2.5 months. The short-term trend in November crude oil has turned in favor of the bull camp with yesterday’s gains, leaving support at $80.51. Upside resistance comes in at $83.98, then $84.77.

GASOLINE: November RBOB prices have taken a lower track this morning, as they retraced a portion of yesterday’s explosive rally. It seemed that the combination of European financial leaders trying to come to a resolution for struggling regional banks, as well as a risk-on appetite supported the early gains. It also seemed that the relative outperformance of RBOB to its peers in the crude oil complex reflected something more fundamental taking place. Cash gasoline markets in the Northeast yesterday traded higher, bolstered by fears of tightening supply from recent refinery outages and slight uptick in demand. This is expected to continue over the short-term, as a couple of Pennsylvania refineries remain offline. The technical action in November RBOB closed above its late-September swing high of $2.4669, and that provides the bull camp with an intermediate term edge. Short-term support ratchets up to $2.5645.

HEATING OIL: November heating oil prices established a higher high this morning, marking a $0.17 rally from this week’s low of $2.6975. The gains in heating oil appear to be the result of an improving outside market tone, rally in global equity markets and ideas that the global economy might be on a recovery track. It’s possible that the US heating oil market drafted a level of support following inventory data from the Amsterdam-Rotterdam-Antwerp (ARA) storage hub that showed gasoil inventories plunging to their lowest level in 18 months. The short-term price action in November heating oil turned positive during yesterday’s rally and satisfied near-term technical targets at $2.8648. The next level of resistance comes in at last week’s highs of $2.8970. Short-term support this morning comes in at $2.8350, then this week’s swing low at $2.7530.

TODAY’S ENERGY MARKET GUIDANCE: The crude oil complex has taken a lower track heading into this morning’s key economic data on the US labor market. A portion of this week’s explosive rally have come as the market has begun to price in a modest rebound in economic conditions, which leaves this morning’s report as a key determining factor. Market expectations are for September US Nonfarm Payrolls to have increased somewhere in the range of 50,000 to 75,000, and the market probably needs to see something north of 75,000 to extend this week’s gains. Markets across the crude oil complex have become short-term overbought and vulnerable to disappointment.

Soybean Market Commentary – 2011.01.21

by on January 21, 2011

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NEAR-TERM MARKET FUNDAMENTALS: A weak US dollar and news that China inked deals for 3.07 million tonnes of US soybeans worth near $1.8 billion at the trade delegation meetings in Chicago failed to provide much support overnight. Traders see improving weather and crop conditions in Argentina and there is continued talk of the overbought technical condition of the market. Traders see recent rains in Argentina as beneficial and after 4-5 days of hot and dry weather, there is a cold front next week which could bring two days of showers and cooler weather which traders believe could be very beneficial to crop conditions. Traders remain concerned that China will slow their economy to fight inflation. China plans to continue to offer state reserves at auctions next week but will also be buying soybeans from producers to re-build state reserves. China plans to offer 300,000 tonnes of soybeans for auction on Tuesday. The corn market saw a strong recovery to close sharply higher on the session yesterday and the late buying in corn helped support a slightly higher close in old crop soybeans. November soybeans managed to recover from early losses to trade moderately higher on the day and to post a new high for the move. Traders see the “need” for November soybeans to move higher now in an effort to entice producers to shift to plant more soybeans. Cash markets are steady as recent weakness in futures has slowed producer selling. Traders see soybean weekly export sales for release before the opening near 600,000 tonnes, meal sales near 95,000 and oil sales of near 60,000 tonnes. Old crop oil sales need to average just 6,600 tonnes each week to reach the USDA projection for the year. Argentina truck drivers and port workers near the main grain terminal at Rosario plan to go on strike from next Wednesday to protest pay. This could disrupt to flow of oil and meal on the world market.

TODAY’S GUIDANCE: Private forecasters will be releasing planted area estimates today and if there is a continue guess that producers will not significantly raise soybean plantings, November soybeans still have time to “buy” the acres. As a result, while the Argentina weather looks bearish, the need for more acres could cause new crop soybeans to lead the rally higher. An extremely tight outlook for US stocks and the Argentina strikes are also supportive forces which should provide support on a shallow correction from the highs.

Crude Oil Strategies – 2010.12.20

by on December 19, 2010

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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 – 2010.08.27

by on August 27, 2010

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CRUDE OIL MARKET FUNDAMENTALS: October crude oil has taken on a defensive stance ahead of key U.S. GDP figure and comments from Fed Chairman Bernanke. Outside markets appear subdued in anticipation of a reduced U.S. growth forecasts from the previous estimate of +2.4% down towards +1.0% to +1.3%. In fact, that uncertain economic backdrop was echoed by a Barclay’s report released Thursday that lowered their price outlook for crude oil in 2010 by 4.8% and in 2011 by 7.6%. Additionally, markets are anxious and somewhat hopeful ahead of Fed Chairman Bernanke’s speech that he may offer new ways to stimulate demand, and that is a factor that could save October crude oil prices. However, the fundamental picture for crude oil remains flush with ample supplies in the face of slumping demand, and that has some analysts forecasting OPEC shipments of crude oil to slip a fraction in the upcoming month to 23.38 million barrels per day. There was also data released overnight from India that pegged their July crude oil production jumping over 15.5% compared to year ago levels, at the same time refineries boosted output by nearly 14.0% in the same period. Finally, the softening U.S. demand outlook has weighed heavily on WTI crude oil compared to Brent crude oil spread relationships, and that sent the premium for Brent out to new two month highs. Technically, October crude oil is showing signs of further upside potential. Volume has been above average during the recent two day advance, as the market rebounded from severely oversold conditions, and that gives the bulls hope for more. Short term support for October crude oil lies at $72.35 to $72.20, which should contain weakness barring any demand shocks from this morning’s key data flow. The short term trend provides the bulls with the edge but that edge will be erased quickly if the US GDP is below 1%.

PRODUCT MARKET FUNDAMENTALS: GASOLINE: October RBOB prices got off to a shaky start after a gap lower open, but have since recovered to their best levels of the early morning trade. Prices have recovered from severely oversold levels, but now rely on improving demand fundamentals to continue higher. Perhaps a positive result from this morning’s U.S. GDP figures and/or upbeat comments from Fed Chairman Bernanke could provide a bullish catalyst. These two factors will most likely dominate the trade today and for now expectations are set at a very low level. It appears there has been a let up in South African demand overnight, and that pressured European gas crack spreads. There were also comments from cash traders that noted weak U.S. RBOB prices have begun to take their toll on European markets. Technically, October RBOB is trying to make a turn higher and is in the process of building a base. This morning’s early rally has eclipsed Thursday’s price highs, and that now opens the door for a further push toward $1.8820. If prices can hold trade above this level for some time today, there is potential for a further run back to $1.95. The bulls have definitive edge this morning, but have to contend with significant macro developments.

HEATING OIL: October heating oil prices managed to shake off weakness overnight and bounce from $2.01 support. The combination of an extremely oversold market and a rebound from four month lows has sparked the latest rally, and that favors higher prices in the near term. Trading volumes have been running above average levels during Wednesday’s wide range reversal and on Thursday’s move higher. For now, the bulls are closing in on resistance at the $2.04. October heating oil has good upside momentum and clearance of upside resistance levels could provide a further push toward $2.15 in coming sessions. However, this morning’s macro news flow certainly has the potential to extend the upside, but also poses a very significant risk if growth expectations are not met.

TODAY’S ENERGY MARKET GUIDANCE: Without better than expected GDP readings the bear camp might be able to regain control.

Energy Market Commentary – 2010.04.19

by on April 19, 2010

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CRUDE OIL MARKET FUNDAMENTALS: Energy prices continue to feel the effects of last Friday’s activity, as the current wave of risk aversion has caused widespread liquidation of many physical commodity positions. With crude oil already well into overbought technical conditions last week, this action has now taken the market well below a series of key support levels on the charts and that increases the prospect of even more technically related selling ahead. Memories are fresh in the market that these sort of financial scandals often become the first step in protracted economic slowdowns, so it is understandable that we would see such a severe move lower, as the funds start evacuating any risky markets. The European air travel ban impacts not only fuel usage in that area, but it has also dampened business activity as well, therefore we see the possibility of weakened economies on both sides of the Atlantic and that leaves only Asia as the one area in which demand should continue to be strong. However even that view was called into question last night by ideas that credit conditions in China are likely to be tightened even further. With the Commitments of Traders Futures and Options report as of April 13th for Crude Oil showing the Non-Commercial and Non-reportable combined traders held a net long position of 242,210 contracts early last week, and the June crude oil market managing an additional rally of $2 per barrel beyond that report that could also leave the market even more vulnerable to a wholesale liquidation ahead. If the US equity market continues to ratchet downward and the US Dollar continues to rally that could set the stage for a return to the middle of last months consolidation trading range bound by $80.00 to $82.50. We see little resolve to stop a slide in June crude oil down to $81.92.

PRODUCT MARKET FUNDAMENTALS: GASOLINE: June RBOB has now fallen over 10 cents from Thursday’s close, as the risk aversion wave has sent prices tumbling away even further from the highs for the move last week. If the US stock markets continue to deteriorate, we may see this sell off extend itself towards the $2.19 level, as any extra strength in demand shown from the summer driving season in the US ahead may be called into question in the wake of a lingering financial crisis in the US. The Commitments of Traders Futures and Options report as of April 13th for Gasoline (RBOB) showed Non-Commercial traders were net long 77,778 contracts, a decrease of 1,952 contracts. The Commercial traders were net short 91,172 contracts, a decrease of 1,248 contracts. The Non-reportable traders were net long 13,394 contracts, an increase of 703 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 91,172 contracts, which represents a decrease of 1,249 contracts in the net long position held by these traders.

HEATING OIL: In addition to the broad based liquidation sell off, a seasonal reduction in use due to the end of the heating season in the Midwest and Northeast will likely keep June heating oil under the most pressure in the energy markets. The drop off in jet fuel usage in Europe due to the Icelandic volcano will also keep this market under pressure over the next few days. The Commitments of Traders Futures and Options report as of April 13th for Heating Oil showed Non-Commercial traders were net long 35,856 contracts, an increase of 1,988 contracts. The Commercial traders were net short 61,087 contracts, an increase of 2,340 contracts. The Non-reportable traders were net long 25,231 contracts, an increase of 352 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 61,087 contracts. This represents an increase of 2,340 contracts in the net long position held by these traders.

TODAY’S ENERGY MARKET GUIDANCE: The bear camp has all the cards today and that in conjunction with technical damage on the charts should leave the markets poised for even more downside ahead.