Knowing what to fear.

Could deflationary pressures be building once again in the energy complex? After a spurt of green shoot related growth, it seems the economy is headed back to neutral making one wonder if oil demand will start to fall off the map once again. This morning it was reported that  the U.K.'s annual inflation rate fell below the Bank of England's 2.0% medium-term target for the first time in 21 months in the month of June, while the retail price index, according to Dow Jones newswires, posted its sharpest drop since records began in 1948.

Oh sure, that pesky, nagging, little US trillion dollar deficit thing may be inflationary down the road yet the bigger threat to the economy is a lack of economic activity. As the US government moves to bail out CIT Group Inc one of the largest lenders to small businesses, the creeping economic malaise seems to be coming more apparent. If that deflationary mood is reinforced by a weak Producer Price Index then oil's technical bounce should be short lived.

Over the long term, while we are chasing windmills, Russia and China seem to be moving to secure their energy future. The Financial Times reported yesterday that, Oil companies from emerging economies are responsible for more than half the sector's biggest mergers and  acquisitions by value this year as state-controlled companies have exploited western groups' relative weakness to secure control of resources. Emerging economy buyers, led by Chinese and Russian companies, paid for $24.2bn of the total $48bn value of the 50 largest oil and gas deals agreed in the second quarter, according to PwC, the professional services firm. Such companies accounted for one-fifth of the total value of deals last year. M&A advisers expect state-controlled groups to remain active in the takeover market in the coming months, benefiting from sponsor governments' financial strength and less pressure than western companies over short-term performance. The FT says that the leading buyers in the second quarter were state-controlled groups, Sinopec of China, which agreed to pay $8.8bn including debt for London listed Addax Petroleum and Gazprom Russia's state owned oil company which bought a 20% stake in Gazprom.

Good News! Nothing blew up in Nigeria last night. Maybe that is because Henry Okah, the jailed leader of the main rebel movement in Nigeria's oil-rich Niger River delta was freed after he accepted a government amnesty. Bloomberg News said that the Movement for the Emancipation of the Niger Delta, or MEND, made the release of Okah one of its conditions for ending its armed rebellion. Okah was arrested in Angola in September 2007 on suspicion of gun-running and deported to Nigeria in February last year to face a treason trial. Bloomberg says that armed attacks targeting oil facilities in the delta region, home to Nigeria's oil industry, have cut more than 20 percent of the nation's oil exports since 2006. The West African country has the continent's largest hydrocarbon reserves and is the fifth-biggest source of U.S. oil imports.

Sell August crude at 6300 - stop 6540.

We're short August RBOB from apprx 16570 - stop 16770.

Sell August heating oil at 15800 - stop 16300.

We're long August natural gas apprx 330 - stop 320.

Corn & Ethanol Report

Good Morning !

Is it the weather ? Or a bottom ? The December Corn had a turnaround yesterday.

It continued the upside swing in the overnight market. Settling at 343 which was up an additional 3 1/2 cents. The range was 343 1/4 to 340 1/2.

Business Inventories,Producer Price Index and Retail Sales due out :30 C.S.T. could help squash this current spike to the upside.

On the Energy Front the song remains the same. We currently are showing strength in the Stock Market and the  U.S. Dollar starting to fade of it's rally the past week.

Gold and Silver look poised for a pop !

Let's see how the Stock Market digest these economic numbers today.

This should be an education if we can sustain any rally.

Have a Great Trading Day !