Finding footing in a world where the walls are closing in. Oil found strength in a late day rally as the stock market marked time. The market was being torn in different directions hoping for words of wisdom from Fed Chairman Bernanke or Treasury Secretary Geithner. They got none. Heating oil and natural gas seemed to be supported by a blast of cold that supported the expectation of heat related demand as well as anticipation of the eagerly awaited API report. The report that just couldn't get any respect is now starting to move the market. Why do I say that? Well the market seemed to want to rally ahead of the API supply report. And it was not just short covering before the report that I am talking about but after report as well.
The API did give a boost to crude by reporting a drawdown in crude supply to the tune of 463,000 barrels from last week. But what the key here is a big jump in refinery runs. Runs jumped from 81.9% to 83.5%! Refiners seem to be responding to the big jump in margins and have started that long day's journey out of maintenance. Could spring be too far behind? Oh joy! The API reported that weekly gasoline stocks were off 642,000 barrels from the week before and distillate stocks up 1.6 million barrels. Product supplies should rise with an abundance of crude but worries about imports could help support crude on days when the stock market is not getting crushed.
Of course the dollar was in play. Bernanke seemed to extol the dollars good fortune and seemed to be tweaking his nemesis in the EU, the unassuming Jean Claude Trichet. Trichet scoffed at Bernanke when he urged the EU to cut rates to help the dollar and stave off a worsen financial crisis. Now it is Trichet that is a position of defending a sputtering Euro by saying the thought of a member nation leaving the EU is ridiculous. But just to be safe Giselle better transfer some of her Euros back into dollars.
In the mean time the NYMEX crude Contango is coming in. It is partly because the market is pricing in weaker future demand and a stronger US dollar. The Inflation fears that help feed the Contango are being toned down as deflation seems to be a greater near term threat.
Still the huge contango and the investigation of the USO fund and its impact on trading is giving the NYMEX crude oil contract a bad rap. But whether it is fair or not the competition is looking to exploit that perception. Reuters News reported that Plats on Tuesday announced a new crude oil market focused on Gulf of Mexico sour grades as an alternative to the increasingly criticized historical marker, West Texas Intermediate. Platts is a key assessor of crude market prices, as well as a publisher of energy industry information. They said the new marker would capture the value of sour crude oil in the U.S. Gulf of Mexico, the hub of the U.S. oil industry. The company said it was currently accepting industry comments on its proposal and was proposing to launch the new market on March 16. Sour crude contains more sulfur and is generally less valuable than sweet crude because it requires more processing to make gasoline, diesel and other products. But much of the world's crude is sour, and it is commonly used in refineries.
The new marker will be named Americas Sour Marker (ASM) and will reflect the most competitive value of four U.S. Gulf Coast pipeline crudes: Mars, Poseidon, Southern Green Canyon and Thunder Horse, Platts said in a news release. There is growing market consensus that WTI, priced at Cushing, Oklahoma, and usually viewed as a global reference price, is in fact functioning more as a local, land-locked crude with an increasingly tenuous relationship to the larger U.S. and international markets, said Jorge Montepeque, global director of market reporting for Platts. Platts officials cited recurring deviations in price between the WTI futures benchmark and other key global oil markers. They also cited the growing need for a U.S. sour crude benchmark because sour is so widely used. Nearly two-thirds of the crude going into U.S. refineries to make petroleum products including gasoline and diesel is sour, Platts said. The methodology for assessing ASM would follow the Platts Brent-Forties-Oseberg-Ekofisk (BFOE) model, reflecting the cheapest of the four Gulf of Mexico sour grades included, the news release said. Platts plans to continue separately reporting the value of the four U.S. Gulf sours, and ASM will not replace any currently reported grade. ASM will be reported with all other sweet and sour grade assessments. the news release said. Market reaction was muted. Broken or not, WTI is not going away as a benchmark, one trading manager said.
The NYMEX told Dow Jones that the market has spoken and believes that the NYMEX crude will main the world's benchmark. But just to be safe, maybe the NYMEX should list a sour crude contract. Past sour crude contracts have not fared well in the world of futures.
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Sell April Crude apprx 4570 - stop 5100.
We're short April heating oil from apprx 12342 - stop 12900.
Sell April RBOB at 13890 - stop 14300.
Sell April natural gas at 437 - stop 499.
The Dan Flynn Corn & Ethanol Report
Wednesday March 4th 2009
Good Morning !
The May Corn settled at 355 1/4 down 4 3/4 cents
in last nights action.
The range was 355 3/4 to 347.
Fundamentally dry weather in South America coupled
with profit taking drawing a short covering spike to
On the Energy Front,
The April Crude Oil failed to hold the break under $40
has injected no fears in the bulls.
I still beleive this is a short term rally.
Inventory numbers due out today should break this
market and put the bears in command.
Have a Great trading Day !