Futures Market Blog

02.04.09

————————Last————————Last Week 1.21
Mar Crude—————-40.27————————-42.17
Mar Heat—————-132.98————————142.25
Mar XRB (Blended Gas)—–121.96———————–121.05
Front month March crude futures fell sharply on Wednesday after inventories announced by the Department of Energy came in higher than previously forecast by trade observers. Crude stocks rose by 7.2 million barrels to 346 million barrels. This is the highest stock level since July and gives the indication that recessionary pressures have reduced demand for crude and its products. The trade was only looking for an increase of 3 million barrels. Demand is continuing to contract faster than OPEC can coordinate production cuts. Supplies are 15% higher than the five year average. The structure of the market remains in a contango with the front month trading at a discount to the differed months. Supplies at Cushing Oklahoma are at their highest levels since 2004. Prior to the Department of Energy report some OPEC members were saying that prices were firming and the further cuts may not be needed. OPEC has been adhering to the production reductions to the surprise of some. OPEC production is down 3.5% from December levels. Abu Dhabi, the U.A.E. and Qatar are all planning further cuts next month. OPEC is looking for process to rebound in the 3rd quarter. The next scheduled OPEC meeting is March 15th.  The American Petroleum Institute stated that crude stocks had risen over 8 million barrels to 346 million. API is now releasing their report on Tuesday evenings.  Money flow for crude oil remains negative. The market is looking forward to Friday’s US unemployment report to gauge the relative weakness of the US eco nomy. The crude market has been tracking the stock market lately.

———————–Support—————Resistance
Mar Crude—————-39.00—————–42.00
Mar Heat—————–128.60—————137.90
Mar XRB——————104.35—————134.00

METALS

————————–Last——————-Last Week
April Gold—————–906.50——————899.30
Mar Silver —————–12.49——————-11.955
Apr Platinum————-970.10——————960.00

Gold futures managed to consolidate recent gains on Wednesday after selling interest came into the market at the 925 level. The previous market paradigm of weak dollar, strong gold has been replaced by a new model: strong dollar, strong gold. Both the dollar and gold are seen as a refuge in these times of uncertainty, recessionary pressures and lack of confidence in paper assets. Increased government debt to stimulate economies will devalue all currencies and provide the impetus to buy gold. UBS raised its average annual price for gold in 2009 to $1,000 an ounce. On the other hand, there are those who aren’t as bullish on the prospects for gold citing that a global slowdown will erode demand for all commodities and that gold will eventually reflect these deflationary pressures. At least for now, gold is being thought of more as a currency than a barometer of inflation, however. Money flow remains positive.

————————-Support———————Resistance
Apr Gold——————-875.00———————923.00
Mar Silver——————-11.97———————-12.63
Apr Plat——————–943.00———————989.00

SOFTS

————————Last————————-Last Week
Mar Coffee—————115.90————————-122.50
Mar Sugar—————–12.59————————-12.88

—————————Support——————Resistance
Mar Coffee——————-114.50——————-125.00
Mar Sugar——————–12.36 ——————–13.20

—————————–Last——————–Last Week
Mar Soybeans—————–9.494——————–9.824
Mar Corn———————3.582——————–3.844

Money flow in corn remains decidedly negative. Corn was under pressure on the idea that rains will move into Argentina and revive crops. This, in turn, would help to maintain prices in Brazil and stabilize yields. Some of the driest regions in Argentina received almost 3 inches of rain. Beyond that three more systems are scheduled to pass through the key growing regions. Both the fundamental picture for corn and the chart picture for corn seemed to be in agreement. Corn prices were also hurt by the fact two major US based ethanol producers are in bankruptcy proceedings.

Soybeans were also under pressure as March fell by 13.5 cents to the lowest level since December 26. Soybeans are 42% from the highs seen in July of last year. Prices for soybeans are lower because demand has dried up. Livestock producers have cut back on Earth reducing demand for soybean meal soybean consumption of December was 14% lower than last year at this time.

————————–Support————–Resistance
Mar Soybeans—————-9.194 —————–9.76
Mar Corn ——————–3.47——————3.79

Chuck Kespert

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.