Oil prices were ready to fly and were starting to take off but may end up grounded as the market starts to fathom the impact of Obama's budget. It's not the age of big government that's back but an entirely new era called Mammoth government that has emerged. Consider these facts as laid out in the LA times. Obama's budget would account for 24.1% of next year's estimated gross domestic product, one of the highest percentages since World War II. The time of Mammoth government will raise taxes, redistribute income and spend more on social programs than on defense.

This new age is going to implement policies that will touch almost every aspect of Americans' lives. Hang on to your pocket books my friends. And that is not the worst of it. Obama is attacking the rich again with a tax policy that will make sure the housing crisis is prolonged by reducing the amount of money that a family making over $250,000 a year can write off from their mortgages. Oh yes, how will this help reduce the record amount of unsold home inventories? Let's penalize families that can actually afford to buy homes and discourage them from doing so. Let's penalize the people that actually paid their mortgages on time and bailout the ones who did not. That makes a lot of sense. How is this going to help unfreeze the credit markets? The people most qualified to get a loan will have less incentive to get one. Does he think that all citizens are created equal means economically equal instead equal under the eyes of the law?!

And Obama is going after big oil as well and at the same time reducing our nation's energy security. According to Bloomberg News he thinks he can raise at least $31.5 billion over 10 years by raising royalty fees and imposing new taxes on oil companies. Exxon Mobil, Chevron Corp, and ConocoPhillips would be the companies subject to new costs under the plan. Bloomberg says that the budget proposal includes a $5.28 billion excise tax on Gulf of Mexico oil and gas. The tax, which would begin in 2011, they're saying will raise at least $500 million a year through 2019 by closing loopholes that have given oil companies excessive royalty relief. Currently, according to Obama, the public receives $12 billion annually from fees and royalties and other federal payments related to oil, coal and other mineral developments. It also would impose a $1.16 billion fee for companies that have non-producing leases. Congress failed last year to approve legislation preventing companies from getting new leases to drill for oil and gas until they can certify they are developing on 68 million acres of already-leased areas.

Bloomberg quotes the President of the American Petroleum Institute as saying the new taxes could reduce our nation's energy security by discouraging new investment in domestic oil and natural gas production and refining capacity and pushing those investments - and American jobs - abroad. So when the oil companies pass on these fees to the consumer and the government then says they're gouging us, we know who to thank as they speak out of both sides of their mouths.

In addition not only do these policies give an advantage to state owned oil companies, they are the same companies that will be exploiting Gulf of Mexico resources and selling the oil in the United States. Oh sure, the Obama administration wants to prove how tough he is and can stand up to big oil, yet his own Energy Secretary, Steven Chu - Mr. OPEC is not my domain (yes, he really said that) - doesn't even have the courage to stand up to OPEC.

This is disappointing as recent market trends in energy seem to suggest that there were some emerging signs that the economy on the ground was stabilizing and perhaps showing signs of bottoming out. We saw that in improved gasoline demand and as Reuter's News reported, we saw that gasoline futures rose to a premium above heating oil futures for the first time since August, 2007. It is also a sign that refiners are getting a better handle on producing the ultra low sulfur diesel.

Oil also rallied on more signs of OPEC compliance. Bloomberg News reported that Abu Dhabi National Oil Co. will reduce exports of crude oil in April after the Organization of Petroleum Exporting Countries agreed to lower output starting Jan. 1. Bloomberg says that the United Arab Emirates state-owned producer will export 17 percent less of Upper Zakum crude oil than contracted, following a 15 percent reduction in March. Shipments of Umm Shaif, Lower Zakum and Murban crude will be cut by 15 percent. The market took this as a sign that not only will we see continued good compliance from OPEC but also to expect further production cuts in the future. Crude hit $45.25, the highest price since Jan. 27. Prices are down 69 percent from their record of $147.27 a barrel last July.

Today's oil fate is with the economic numbers. For oil to sustain its recent optimism about the demand side of the equation it is going to need reassurance from the stock market. With a slew of very important reports due out today, the market will be on pins and needles. Long term we are still bearish but short term we are seeing strength. Position traders should cover their risk with options and short term traders call me at 800-935-6487 to open your account and get the latest! Or just watch Fox Business all day where you can see me every day!

Wow a big week for emails! Thanks for all your nice comments! If you are ready to trade and need information just call me at 800-935-6487 or email me at pflynn@alaron.com. Hedgers and speculators are welcome!

Sold April crude oil at apprx 4100 stopped out at apprx 4360. Sell again at 4770 - stop 5100.

Short April heating oil from apprx 12342 on rollover - stop 13300.

Stopped on short April RBOB from apprx 12700 at apprx to 13400. Stand aside today or day trade.

Sell April natural gas at 500 - stop 540.

The Dan Flynn Corn & Ethanol Report

Friday February 27th 2009

Good Morning !

The current economic woes continue to rollover in

the Corn market.

The May Corn settled 5 cents lower at 365 1/2 in

last nights action.

Scattered showers and the position of funds continue

to put pressure on this market.

On the front it's the same old song.

Citibank is the next casualty won't be helpful to the

Stock Market and it may get clobbered.

I remain bearish on Energies.

Remember the current rally was do to the Stock Market


Have a great trading day !