Maybe oil is just too big to fail? Call the Fed! Call the President! The big bulls are still in control. Oh sure it sounds funnywhen places like Chinasells our debtand thensends us a statement about our rising budget deficit and our sustainable economic policies. Yet if the economy fails, the Fed will have no choice but to print more money and drive down the dollar and drive up oil. Oh its feels good to be too big to fail.
Oil makes a statement in a volatile session that shows that oil bulls refuse to go quietly in the night. The best chance for bears to take control of this market failed in a late day rally as the market failed to follow through on its bearish momentum. Oil denied the bears a follow through on the downside as $69 a barrel proved to be a rock hard bottom. Maybe you can blame it on the options expiration or the weakness in the dollar but unless oil breaks down real soon this type of action means we could be building momentum for a leg up real soon.
Of course the bears may also point to the fact that the weekly Energy Information Agencies (EIA) supply report was not as bearish as it could have been. For example the EIA reported that U.S. commercial crude oil inventories decreased by 3.9 million barrels from the previous week. That was a larger draw than expected and larger than the API reported. That was bullish now was it not?
Initially the market ignored the draw in crude supply because it was accompanied by a larger than expected increase in gasoline supply. The EIA reported that gasoline supplies increased by 3.4 million barrels last week. Yet at the same time, remember that gasoline supply is still well below the five year average and we are seeing signs that gasoline demand growth is getting back to a more normal range. Over the last four weeks, motor gasoline demand has averaged nearly 9.3 million barrels per day, up by 1.1 percent from the same period last year. Yes, an increase from last year. Nothing earth shattering but enough to make the rest of the report in a not so bearish light. Oil could worry more about the draw in crude supply and the fate of the dollar.
Obviously the dollar was not impressed with President Obama's plan to overhaul the financial system. I mean what does too big to fail really mean? I want to be too big to fail. That way I could act irresponsibly, take huge risks and if I am wrong,heck who cares,I get bailed out! Sounds like fun! Or I could get broken up, reaping huge profits in the process. Yes, it is good to be too big to fail.
Yet will natural gas fail? It has been impressive even as storage has been rising. Reuters expects today's injection will be 106 bcfs.The market is taking heed of production cutbacks, yet down the road as demand rises the worry is that storage for gas will be less than adequate. Reuters news reports that US capacity to store natural gas may get its first real test this year as excess production, slumping demand and increased imports of liquefied gas combine to push storage fields to their limits.That points to even more pressure on prices, which are now at about a third of last year's level due to the recession. We may get to the point where there's no place to put gas. (Producers) are either going to be forced to shut in or prices will fall enough that they voluntarily shut in. I think we'll see a mix of both, said Ron Denhardt at Strategic Energy & Economic Research, a Massachusetts-based consulting firm.
After ending winter at their second highest level ever, gas inventories- or supplies pumped underground from April through October to help meet winter heating needs- have grown at a record pace so far this stock building season.Total stockpiles stand at 2.443 trillion cubic feet, a record for this time of year, and if inventory builds continue at the current rate, stocks could top 4 tcf by November. No one knows for sure if there's enough space to store all that gas.Even if injections just match the five-year average for the next 20 weeks or so, stocks will hit an all-time high of 3.8 tcf by winter, 7 percent above the previous record in October 2007 and a volume some consider to be the limit. There are certainly a number of analysts who believe we will be pressing hard on the system. We think there's going to be a new record (high in storage), but it may not necessarily push on the peak number, said Bill Trapmann, industry economist at the U.S. Energy Information Administration.EIA said the U.S. inventory build in May alone totaled 465 billion cubic feet, the largest for that month since it records were first kept in 1976.Trapmann said EIA pegs peak capacity at just under 3.8 tcf, but the theoretical total design capacity of all existing U.S. storage fields, less base gas, is probably closer to 4.2 tcf.Base, or cushion, gas is the volume of gas used as permanent inventory in order to maintain adequate pressure and deliverability rates in storage reservoirs. A must read by Reuters.
Buy August crude at 6890 - stop 6690.
Bu August heating oil at 18100 -stop 17600.
Buy August RBOBat19300 -stop 18900.
Buy August natural gas at 4120 -stop 3290.
The Dan Flynn Corn & Ethanol Report
The July Corn settled at 405 in last nights action.Which was 2 3/4 cents lower.
The range was 408 3/4 to 402.
Our focus remains the same,key on the U.S. Dollar and the major question is will we see an actual summer ?
On the Energy Front it looks like the bears gave it their best shot.
July Crude not able to break 6900 and bounced off that support.
I look for continued strength in this sector.
Lets see how traderesdecypher the Presidents new regulation policies.