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Green shoots or overshoots.Sometimes you feel like a green shoot other times you feel like a weed. Hey does anybody use energy when the factories are shut down?

The oil market gave back its dollar inspired gains as it seemed to ponder, if only for an afternoon, the gravity of the economic situation that surrounds us all. Oh yes the energy markets can get optimistic about the fact that housing starts in May jumped by 17.2 percent from April to a seasonally adjusted annual rate of 532,000. And that single-family housing starts rose by 7.5 percent and multi-family housing starts jumped by 61.7 percent. Yet when you stop to think whatshapeour industrial sector is in it is almost enough to make you cringe. Industrial production fell 1.1% in May as industrial output fell as reported by Market Watch to the lowest level in 11 years. That is down 13.4% this year and is the biggest year over year decline since 1946.That follows last week's record drop in production in the Euro zone and isnot boding well for global energy demand.

Confidence in the market was further shaken by the fact that the Fed was more active in the bond market than expected. Is the Fed worried that the economy is not as good as some of the green shoots might be signaling andthat might not bode well for an industrial uptick in demand. Bloomberg news reports, Federal Reserve officials are considering whether to use next week's policy statement to suppress any speculation they're prepared to raise interest rates as soon as this year. While policy makers have signaled they accept an increase in longer-term Treasury yields as the economy improves, some are concerned at any premature anticipation of rate rises. The Fed seems to think that we could see some damage to price structure that could tie the Fed's hands if things get worse. They worry the market is getting set up to be disappointed. For oil Fed actions have had a historic impact on price. Oil has risen in response to quantitative easing and its impact on the dollar. If the Federal Reserve signals that rates will stay at zero longer than previously thought then the vulnerability of the dollar will be exposed. That is especially true in the backdrop of our historic trade deficit.

Oh sure you could say that the Fed concerns over the economy is another sign that demand for energy will be poor yet the reality is that if the economy slows the Fed can always step in and print more money and drive back up the price of oil. The Fed Meets June 23 and 24 and at that time if they signal that rates are on hold and present no exit strategy from its accommodative policies, then the dollar will continue to get hurt and the price of oil will continue to rise.

The American Petroleum Institute weekly energy supply reportwas not that exciting and actually a bit bearish for gasoline that seems to have broken out on the charts. The API reported that crude stocks fell by 1.3 million barrels and distillates up by 881,000 and gas up by a bearish 2.1 million barrels. Still the bearishness in gasoline might be offset somewhat by the reports of all of our reefing problems. Bloomberg News Barbara Powell reported, Gasoline futures topped $2.11 a gallon for the first time in eight months as refinery outages reduced supplies and as the dollar fell from a three-week high versus the euro. She reported that, Valero Energy Corp. said that production at its Norco, Louisiana, refinery will be significantly reduced for several weeks because of a June 9 fire. I told Barbara that the market is concerned that supplies are below the five- year average, oil is up, the dollar is getting slammed again. It's the perfect recipe for a little bit of a pop and pop we did! We snapped, crackled and popped and then we dropped.

Are you being scared straight? Let us set you straight on the Straits!!! The Straits of Hormuz are safe! And so is the oil that is flowing through it! Some analysts are raising concerns that the uprising in the streets in Iran over the contested presidential election will somehow inspire the Iranian government to try to cut off oil supply or try to block the Straits of Hormuz. That is very unlikely. The situation in Iran is an internal problem in Iran. They have enough trouble without raising the ire of the world by cutting off supply in the Straights. So if anyone tries to scareyou then set them straight! Iran has bigger problems right now.And do not worry about a cut offof supply from Iran as the world has plenty of spare capacity to make up for any loss.

Even on top of the losses from Nigeria that continue to get worse. Dow Jones reports that Shell Petroleum Development Co. said Wednesday it has declared force majeure on Nigeria's Forcados off take program for the remainder of June and for July.The move comes as a result of damage to the TransForcados trunkline at the Chanomi creek, a company spokesman said, at Shell's western operations in the Niger Delta.

Of course longer term the picture is not as clear cut. Massive production cutbacks cast a bullish picture over long term energy supply. Oil projects are getting delayed because the money is not there.Just yesterday Dow Jones reported, Russian gas giant OAO Gazprom (GAZP.RS) plans to lower its capital spending program this year to 500 billion rubles ($16 billion) from RUB637 billion originally planned. They say the savings will come from savings will partly come from lower spending at the Bovanenkovskoye field, Ananenkov said.

Gazprom plans to delay the launch of the key field located on the Yamal peninsula by one year to 2012. But that is not all Reuters reports, Russia has indefinitely delayed plans to build gas pipelines to China because it still cannot reach a pricing deal with Beijing, Russia's gas export monopoly Gazprom said.No one is talking about gas supplies to China in 2011 anymore, Gazprom deputy chief executive Alexander Ananenkov told a news conference. The statement came as Russia's President Dmitry Medvedev and Prime Minister Vladimir Putin met Chinese President Hu Jintao during his state visit to Russia.

Buy July crude at 6790 -stop 6490.

Buy July heating oil at 17200 - stop 16700.

Buy July RBOBat19000 -stop 16900.

Buy July natural gas at 330 - stop 290.

The Dan Flynn Corn & Ethanol Report

Good Morning ! From Russia With Love ?

Today our President will tell us his plans to further regulate the private sector.

In our current economic woesI don't see anything positive to the free market system.

In the meantime the July Corn settled at 404 which was unchanged in last nights action.

The range was 407 to 402 1/2. The focus remains the same.

U.S. Dollar and weather loom large to where we are going.

On the Energy Front the song remains the same.

We await the weekly inventory numbers due out 9:30 C.S.T.

The markets wait and anticipate our Presidents speech will factoron the private sector.

Have a Great Trading Day !

Open a Trading Account with Dan Flynn today !