The jobs report shook the commodities markets to their core as everything most people believed about the pace of the economic recovery may have to be reexamined. The US Department of Labor reported the rate of unemployment fell from 10.2% in October to 10.0% in November and non-farm payrolls were nearly unchanged, declining just 11,000 last month. Not only that, a spate of revisions from the last report seems to suggest that job losses have perhaps topped out. While a one month report does not signal a trend, when you couple this report with recent productivity data it seems that indeed the blood-letting on the jobs front is coming to an end. Add to the fact the New York Times is reporting that the Treasury Department expects to recover all but $42 billion of the $370 billion it lent to ailing companies during the financial crisis last year, with the portion lent to banks actually showing a slight profit, according to a new treasury report.
Still is all of that good news enough to shake traders out of the carry trade forever? On Friday we obviously saw the dollar rebound putting pressure on commodities across the board. Gold gave up all the gains they had for the month which despite the month only being four days old, at that point was still a sizeable amount. What we could see is that oil may trade in the lower trading range that we were in from June to October which was between $65 and $75. But to confirm that, oil must close below $75 a barrel today to make us believers. The price of oil has been supported by a weak dollar, weakening even further as the Fed tries to save the economy. With signs that the jobs market may be leveling out, it's possible that could have the market looking at an exit strategy. If the dollar rebounds, that strategy may be a major turning point for global commodities.
Not too hot and not too cold oil prices are just right. At least if you are talking to OPEC's de-facto leader Ali Naimi. The AP says that, Top oil officials from Libya, Kuwait, Algeria and Qatar said Saturday that the Organization of the Petroleum Exporting Countries, which supplies about 35 percent of the world's crude, will likely leave output levels unchanged at the group's next policy meeting on Dec. 22. Saudi Arabia's oil minister, Ali Naimi, said Saturday that oil prices, which have bounced around the high $70s for about two months, were perfect.
My, what big feet you have. What! Hugo Chavez and I actually agree on something? Dow Jones reports that Hugo Chavez may skip the global climate talks in Copenhagen because they might a waste of his time. A waste of his time, my time, everyone's time. As Climategate starts to get some coverage in the mainstream press, it is possible that the entire global warming story is one of the biggest hoaxes and frauds ever perpetrated. Scientists have some explaining to do and the world deserves to know the truth before we mortgage our future by spending billions of dollars to combat a threat that may not even exist. It is funny that this Climategate scandal kind of follows the theme in the late Michel Crichton book State of Fear. His main points in the book are that science that supports or does not support warming is so incomplete that no reasonable conclusions can be drawn. He said the many scientists and others (such as corporations that stand to profit from green technology) that stand to profit from global warming use either real or artificial crises (like hurricanes and earthquakes and melting polar ice caps and extinct polar bears) to maintain the global warming hype. As a result, instead of getting science you enter a world of having a conclusion and getting the science to match that conclusion. Scientists have a conflict of interest and the scientists conducting research on topics related to global warming may subtly change their findings to bring them in line with their funding sources. Does this sound familiar?
We should get a mixed bag on inventories this week. I look for crude to be up 1.0 million barrels, gas up one MB, distillate down one and runs steady.
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Stopped on long January crude from apprx 7590 at apprx 7470.
We're long January RBOB from apprx 19750 - stop 19400.
Sell January heating oil at 20800 - stop 21200.
Buy January natural gas at 412 - stop 390.