The oil market is trying to find an identity in a marketplace that lacks conviction. Overnight we gotmixed news out of China as their exports fell for the ninth month in a row disappointing some and excitingothers who are in the China bull commodity camp.

China imported record amounts of the fuel last month to the tune of 4.6 million barrels a day yet at the same time it wasreported that China's industrial output, trade and retail sales improved but not as much as expected. According to the Chinese Customs Bureau, export salesdropped 23 percent in July from a year earlier. The AFP reports that China's export-dependent economy remained hampered by a grave global situation in July as new data showed continued reliance on the government for growth. Li Xiaochao, a spokesman for the National Bureau of Statistics said that, The grave international environment affected our exports. The growth of some sectors' industrial output remained rather slow. In other words, growth in China is still mainly dependent on the government and government stimulus. So too is their demand for oil which may be going into storage more than through the factories. China is going crazy hoarding oil. They are in an aggressive campaign to secure oil and commodity supplies for the future.

The Wall Street Journal reports that China National Petroleum and Conoco Ltd. have bid $17 billion for Repsol YPF SA's entire stake in YPF. The Journal says that the potential deal could be the biggest overseas investment by China and highlights the country's growing thirst for energy resources globally and its willingness to offer big money for access. It also underlines the ambition of CNPC to build its presence in South America and elsewhere. They also say that this deal would be another example of how Chinese companies are now working together to buy foreign energy assets after years of working alone. The Journal also warns that the potential acquisition faces significant hurdles. A deal could be politically sensitive in Argentina, where YPF is the country's leader in both upstream operations -- the exploration for and production of oil -- and downstream operations involving oil refining and marketing. Still the key thing is that China continues to embrace the security of oil supply while we here in the US take those supplies for granted.

Should we be building in a Hurricane premium again?As of 6 am eastern time, the National Hurricane Center upgraded a storm in the Atlantic to a tropical depression or tropical depression 2 as it is now known. The National Hurricane Center says that a tropical depression has formed in the far eastern tropical Atlantic Ocean. At 6am Eastern time the center of tropical depression 2 was located near latitude 14.4 north... longitude 28.6 west... or about 280 miles west of the southernmost Cape Verde Islands.The depression is moving toward the west near 13 mph and this general motion is expected to continue for the next couple of days. Maximum sustained winds are around 30 mph with higher gusts. Some strengthening is in the forecast and the depression could become a tropical storm in a day or two. It is too early to worry too much about this storm but we will watch to see if this becomes an issue.

The other issue for oil is the Fed. The dollar saw renewed strength ahead of the meeting. The bond market is headed higher and thisshould put oil near the highs. Oil is locked in a range but that will change based on the Fed's economic outlook. The Fed created the bull market in oil and the Fed can take it away.

One market that seems to know where it is going is sugar. Sugar has been in an explosive rally as India hasn't got enough rain and Brazil has gotten way too much. Watch out ethanol lovers as sugar blew through 23 cents before closing below it, hittingits highest price since 1981.India's sugar crop may be cut by half as the monsoon rains have not created enough water to irrigate the crop. The crop in Brazil has been hampered by too much rain. The market is pricing in a supply deficit that could be a shortfall of up to 5 million tons!Sugar went over 22 cents, a new 28 year high, but is far shy of the 1970's high that was over 60 cents.

We're short Sept crude from apprx 7150 -stop 7390.
Stopped on shortSeptember heating oil from apprx19700at apprx20000.
We're short September RBOB from apprx 20750 - lower stop to 20500!
Sell September natural gasat 470 -stop 4 80.

The Dan Flynn Corn & Ethanol Report

Well folks the Corn Market saw some profit taking and squaring of positions before Wednesdays Big Three.

And I'm not talking about theformer unstated runautomakers !

I'm talking about the Big Three Grain Reports due out Wednesday August 12th at 7:30 A.M. C.S.T. Which will include Crop Production, U.S. Trade Balance and U.S.D.A. Supply & Demand.

Should be interesting !

In last nights action the December Corn settled at 334 3/4 putting it up another 4 1/4 cents.The range was 335 1/2 to 329 3/4.

I see continued squaring of positions whichcould push us even higher.

Weather scares will take a back seat for now in the short term as all traders eye the Big Three !

On the Energy Front were singing the same old song! Range bound from $72 to $70.

Plenty of supply with a lessened demand.

Good Supply Low Demand.

When will reality set in?

Don't forget Wednesday is also Energy Inventory Day !

Have a Great Trading Day !