Holy quantitative easing! The Fed flips the commodity complex and saves the oil bulls from a wildly bearish Department of Energy supply report.
The Department of Energy showed that oil demand and gasoline demand is lousy reflecting the same type of economic weakness that inspired the Fed to take this dramatic step to try to avoid what they fear may be a slide back down into a deflationary depression. Slowing demand and rising supply might not matter as the Fed prints trillions of dollars to buy back treasury securities and create an artificially lower yield driving down the value of the dollar and driving up the priced in cheaper dollar oil. The Fed knocked the AIG hearings off the air shocking the markets that thought Bernanke had felt the economy was already showing signs of improvement and that we could see the recession light at the end of the tunnel. Traders that took Bernanke at his word found out that the light at the end of the tunnel was a freaking freight train that caused a historic drop in yield and a major swing in treasury bonds and precious metals. The Federal Reserve and its printing press changed the rules of the game in an instant announcing that it will buy close to as much as $300 billion in longer-term treasuries. And as if that wasn't enough ink, they also plan to increase the size of lending programs aimed at reducing mortgage rates by an additional $750 billion.
Of course maybe this is what the oil traders had been expecting all along. Well if not this, then something big. Oil has trended up since mid February despite the fact that it is obvious that demand is lousy and supplies are almost overwhelming. We saw that in the dramatic build in gasoline supply. Gas supplies rose at a time when they normally fall showing that the hopes that demand would rebound strong is fading once again. As for oil David Bird at Dow Jones Newswires points out that US crude oil inventories, when compared to demand, is above the five year average. Oil supply up 1.942 million barrels, to 353.281 million barrels in the week ended Mar 13, are sufficient to cover 24.9 days of refiner demand. That's in line with a week earlier, but well above the year-ago level of 21.6 days and the 5-year average level of 21.4 days. Refiners inched up crude runs by 0.5%, or 64,000 b/d, to 14.18 million b/d, a 2-week high. The surplus of crude oil stocks to a year-earlier narrowed slightly, at least on an adjusted basis. By this measure, stocks are 47.3 million barrels, or 15.5% above a year ago, the slimmest surplus on a volume basis since Jan 23, and down from 47.9 million barrels a week earlier. On an unadjusted basis, stocks are 41.5 million barrels, or 13.3%, above a year ago, compared with 39.7 million barrels or 12.7%, a week earlier.
OPEC has cut back about as much production as is possible at this time. Some of the strength could be attributed to seasonal strength but it was obvious there was something more to the markets relentlessness. Natural gas closed at a 6 year low.
We're short April crude from apprx 4570 and bought back at apprx 4818. We're now short May crude from apprx 4890 - stop 5150.
Sell April heating oil at 12700 - stop 13300.
Sell April RBOB at 13500 - stop 14300.
We're short April natural gas from apprx 437 - lower stop to 39900!.
The Dan Flynn Corn & Ethanol Report
Good Morning !
Happy St. Joseph's Day !
Uncle Ben (Bernanke) dealt us a bad taste of Rough Rice !
After being quoted that we are on the road to recovery he did an end run and decided we have to print a Trillion Dollars! This shaked rattled and rolled the markets and changed the focus of traders.
You can't trust AIG and now the Fed.
The May Corn settled at 398 up 9 3/4 cents.The range was 398 3/4 to 394 3/4. Talk amongst traders is to see 500 Corn.
In the wake of current events this could be only a launching pad !
Wecould surge through 400 today ! On the Energy Front I still remain bearish on the long haul. However, if we continue to print money like it's going out of a style can only destroy the bears.
Have a Great Trading Day !