Oil breaks as the market shakes as the reality of tight supplies in a post Fed Meeting world. The dollar rebounds and commodity break as the market realizes that while the Fed is still supplying stimulus it is not going to last forever. With petroleum still wobbly after getting hit with this week's bearish supply report the bears have gained control over the market. Technically the Bears biggest fear is profit taking or an economic or geo-political event that could once again change the current landscape. Let us hope that it is not going to be Iran.
The New York Times is reporting today that the United States along with the leaders of Britain and France, will accuse Iran on Friday morning of building a secret underground plant to manufacture nuclear fuel, charging that Iran has hidden the covert facility for years from international weapons inspectors. With Iran's quest to build nuclear weapons now out on the open and after a scathing attack on the UN and its failure to contain Iran and by Israeli Prime Minister Benjamin Netanyahu. Netanyahu expressed outrage at the UN for basically giving Ahamadineajad the denier of the Holocaust and the winner of an election stolen with murder and intimidation legimacy by giving him a forum to with to speak while his country Iran was lying to the world and seeking nuclear weapons. Now that The US, Britain and France will accuse Iran of lying to everyone in the world can sanctions be far behind.
President Obama has set the stage for a new round of sanctions. By dropping plans for a missile shield in Europe the Russian's have grudgingly opened up the possibility in going along with a new round of sanctions. Russian President Dimity Medvedev while expressing doubts they would work seemed to suggest that if indeed the rest of the world goes along with sanctions they would agree and not stand in the way. Of course Russia stands to gain financially as they would be able to pick up some of Iran's oil export revenue.
The most likely sanction against Iran would be a cut of off gasoline imports to thee Iran sits on top of tons of oil they do not have the refinery capacity to produce enough gasoline to meet their own needs. The problem with that is that China may circumvent global sanctions by selling gasoline to Iran anyway.
What will this mean to oil prices? Well if this had happened 3 years ago oil might have run up $10 a barrel or more Yet now the impact will be much less as a world awash in oil and spare production capacity can more than make up any loss of Iranian supply.
Still traders have to beware if this evolves into a military conflict because Iran sits on the straits of Hormuz where 20% of the world's oil flows though on a daily basis. Iran has threatened to shut down the straights if attacked yet many doubt their ability to do so. Still the risk of a conflict in that area would indeed pump up the risk premium for oil around the globe.
Natural gas continued its wild rebound bottom but could be getting close to a short term top. Natural gas has rallied in a desperate attempt to inspire producers to keep producing. The EIA said that working natural gas in storage was 3,525 Bcf as of Friday, September 18, 2009. This was a net increase of 67 Bcf from the previous week. Stocks were 509 Bcf higher than last year at this time and 485 Bcf above the 5-year average of 3,040 Bcf. In the East Region, stocks were 149 Bcf above the 5-year average following net injections of 41 Bcf. Stocks in the Producing Region were 263 Bcf above the 5-year average of 863 Bcf after a net injection of 16 Bcf. Stocks in the West Region were 73 Bcf above the 5-year average after a net addition of 10 Bcf. At 3,525 Bcf, total working gas is above the 5-year historical range. The Natural gas should finish this sipke soon. Get Ready to sell a rally and get a quick correction!
Sell November crude at 6900 stop7278
Sell November heating oil at 1800 - stop 18200
Sell November RBOB 17500 - stop 17700.
Sell November natural gas at 415 stop 440
The Dan Flynn Corn & Ethanol Report
Friday September 25th 2009
Good Morning !
The December Corn is trading at 336 1/4 which is down 1/4 of a cent as I write. The range was 338 to 332 3/4. Weekend rains should slow down harvesting. Regardless anticipate lower prices. The Energies are coming in a little higher after yesterdays big break through key support. I still expect another downturn in prices in this complex.
The U.S. Dollar and Stock Market will predicate how fast we will reach our objective of $35 a barrel.
Have a Great Trading Day !