What's supply got to do with it? What's supply but a second hand emotion? What's supply got to do with it? Who needs a chart when a chart can be broken?
The oil market once again is putting near record supply and recession like demand in the rear view mirror and instead is focusing on the hopes and dreams in our economic future. Oh sure, oil reacted to the down side as the supply side kept rising but today it is off to the races as we await the G20 developments and the ECB decision.
Yesterday the oil supply surge temporarily disconnected oil from the surging stock market but after a wild rebound overnight you have to be asking seriously, what supply has to do with it? The supply side on petroleum continues to grow like a thing from outer space. The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased 2.8 million barrels from the previous week. That puts supply at 359.4 million barrels the highest level since 1990. We saw a surprise increase in gasoline supply as well. The EIA reported that total motor gasoline inventories increased 2.2 million barrels last week and are above the upper limit of the average range for this time of year. Distillates increased by 0.3 million barrels and are above the upper limit of f the average range and stand about 32.5% above year ago levels! Anybody need a barrel of anything? You can get all you want as long as you want to pay the going price.
And today the going price is going, going, gone. Supplies do not matter as much when the global economic powers are jockeying for position and the greater forces of the global economic currency balance waits in the wings. Oil is surging and the dollar is falling, because the ECB is not expected to play their quantitative easing card just yet. There was some talk that they might buy back some of their corporate debt. But the ECB still has room to lower rates so the market's anticipation of the ECB move is bullish EURO. Think of that, the EURO is soaring even as the market expects that they will cut rates to a record low. If they surprise and buy back debt then look for a major reversal of this rally. Right now the EURO versus dollar relationship is causing the commodities to soar.
That might be good news for OPEC who proclaims they can live with $50 oil! What great guys, we are glad to know that! Dow Jones Newswires reports that OPEC Secretary General Abdullah Salem el-Badri said Thursday that the producer group can deal with current oil prices of around $50 a barrel, for now, despite the group's desire for even higher prices. I think we can live with prices of around $50 for the time being. The world economy is in very bad condition and weaker petrol costs are helping consumers, el-Badri told reporters here on the sidelines of an oil conference. At least OPEC Secretary General seems to get that lower prices help the economy. He told Dow Jones that lingeringly weak oil prices could pump around $2.0 trillion of stimulus into the global economy.
Resist the temptation to chase the market! Day traders and swing traders call for updates. It might be time to work on your summer hedge program.
Buy May crude at 4330 - stop 3890.
Buy May heating oil at 12000 - stop 11400.
Buy May RBOB at 12000 - stop 11700.
Buy May natural gas at 320 - stop 290
The Dan Flynn Corn & Ethanol Report
Good Morning !
The May Corn settled at 403 which was up 7 cents. The range was 404 to 394 1/2. The Grain Complex continues to follow the wet weather which will pressure early to on schedule planting.
Keep in mind the stronger than expected U.S. Economic numbers was conducive to this rally.
The ECB also impacted the Energy Front with the complex trading sharply higher.