Streaks are made to be broken. Oil prices broke the string of higher closes as tepid demand and rising supply seem to be zapping some of this market's bullish enthusiasm. Oh sure, the EIA supply report was more bullish than the American Petroleum Institute report, yet even that report did not suppress the nagging question of ample supply. I suppose you can say that the market is focused on better days ahead but for now if oil goes higher, it is a clear example of oil price stagflation.

Oil prices rise as demand decays. Despite impressive moves in precious and base metals oil seemed less than enthusiastic. The EIA reported that US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.8 million barrels from the previous week. That put them at 342.7 million barrels which is way above the average range for this year. That number is more bearish than the API number but what was strange was that according to the DOE the supplies in Cushing, Oklahoma did not budge. Kind of makes you wonder.

The DOE reported that motor gasoline inventories increased by 0.8 million barrels last week and are near the upper limit of the average range. Distillate fuel inventories increased by 1.2 million barrels and are above the upper boundary of the average range for this time of year.

The DOE also reported that for the fourth consecutive week, the U.S. average price for regular gasoline fell, dropping about seven cents to $2.46 per gallon. The national average price has tumbled a total of nearly 23 cents over those four weeks, to bring the price to $1.60 below last year. Prices fell in all regions of the country with the largest drops occurring in the Lower Atlantic area of the East Coast and in the Midwest. The price slipped seven cents on the East Coast to $2.47 per gallon. In the Midwest, the price fell about eight cents to $2.36 per gallon. The Gulf Coast continued to have the lowest price of any region with a price dip of six cents to $2.32 per gallon. For the second week in a row, the price change in the Rocky Mountains was the smallest of any region, slipping four cents to $2.52 per gallon. On the West Coast, the price dropped a nickel to $2.77 per gallon. In California, the average price fell five cents to $2.83 per gallon.

The DOE also said that diesel prices fell in all regions of the country, with the U.S. average price dropping about five cents to $2.50 per gallon. That price was $2.22 below a year ago. On the East Coast and Gulf Coast, the averages slipped five cents to $2.51 and $2.44 per gallon, respectively. The average price in the Midwest fell four cents to $2.47 per gallon. The Rocky Mountain region recorded the largest decrease, falling six cents to $2.56 per gallon. The price on the West Coast dropped a nickel to $2.60 per gallon. In California, the price dipped two cents to $2.70 per gallon.

The reason they are falling is poor demand. Demand growth just is not there. Over the last four weeks, motor gasoline demand has averaged nearly 9.2 million barrels per day, up by 0.7 percent from the same period last year. Distillate fuel demand has averaged about 3.3 million barrels per day over the last four weeks, down by 11.0 percent from the same period last year. Jet fuel demand is 13.9 percent lower over the last four weeks compared to the same four-week period last year.

We're short September crude from apprx 6660 - stop 6760!
We sold September RBOB at apprx 18000 - stop 18500!
We sold September heating oil at apprx 17450 - stop 17650!

 We sold September natural gas at 390 - stop 430.

 

The Dan Flynn Corn & Ethanol Report

The December Corn rallied 8 1/4 cents in last nights action settling 327 1/4.The range was 331 3/4 to 323 1/2.

Looks like we got the bounce traders in the know were calling for and obviously happened.

Will it continue ?

I still believe we are headed lower in the Grand Scheme of Things. We will have bumps in the road.

With volatility a certainty in these times a good crop and Harvest pressure to come makes it hard to be a buyer. On the Energy Front this commodity sector continues to ignore simple supply and demand fundamentals.

I still remain bearish regardless of how the volatility tells me to go Long !

Free Markets for Free Men !

Have a Great Trading Day !