The recession is very likely over. Everybody dance now! Everybody dance now!
That pronouncement by Fed Chairman Ben Bernanke was just the edge the indecisive oil market needed to move decisively higher. After a session where oil kept trying to break down despite the influences of strong moves higher in precious metals and grains, it was the late surge in stocks that drove oil higher. And why did stocks move higher? Well rock and roll! The recession is most likely over! Forget about those inflationary fears raised by some elements of the Producer Price Index or the growing concern by central bankers over the weakness of the dollar, the recession is most likely over so you don't have to give a hoot. Once again oil gets back to the $71.00 a barrel range, an area that acts like a magnet because it is a level we keep coming back to. Of course the larger question is whether the Fed Chairman is right and if he, is it bullish or bearish for oil prices.
Well we do know that the API (American Petroleum Institute) report was bearish for oil prices. Crude supply increased, according to the API, by 631,000 barrels. This was higher than analyst expectations that were seduced by the larger than expected drawdown is supply the previous two weeks. I guess you might think that a 631,000 barrel build might not be such a big deal but it becomes a bigger deal when you pare it with the API's distillate build! The API said that distillates increased by a stupendous 5.2 million barrels. Talk about topping off the tanks! The build in distillates showed not only that we have plenty of supply going into winter, it also shows that despite the fact that the recession is most likely over technically speaking and manufacturing like we saw in the Empire State manufacturing number is improving, we have to remember, as Ben Bernanke says, that the recovery is going to feel like a very weak economy for sometime as many people still find their job security and their employment status not what they thought it was. Are we still dancing?
Maybe that is why the API reported that gas supplies increased by 1.3 million barrels last week. And why did that happen? Well it might have something to do with the fact that many people who felt that their job security and employment status not what they thought it was decided not to travel over the Labor Day holiday weekend. According to the Master Card spending Pulse Report gasoline demand last week fell a whopping 3.2%. That, according to MasterCard, is the ninth straight weekly decline in demand! Maybe we're dancing but we sure as heck aren't driving.
Once again the petroleum market is torn between focusing on weak demand and high supplies versus the hopes that the recession is most likely over. It also has to determine whether these high oil prices will kick us back into a recession. It is obvious that we are still seeing struggles with demand. These struggles show that as the economy recovers the Fed is going to have to deal with the commodity price inflation created by quantitative easing and the economic stimulus. If left unchecked, high prices for oil could derail the economic recovery and create more uncertainty for those unhappy or unsure about their job status.
Big oil find! Dow Jones reports that Anadarko Petroleum Corp. and Tullow Oil PLC has discovered oil off the coast of Sierra Leone, a find that analysts says signals huge potential for further discoveries in an area stretching east through the waters of Liberia, Cote d'Ivoire into Ghana. The Venus discovery confirms the existence of an active petroleum system in the basin and enhances the prospectively of our vast West Africa acreage position, said Bob Daniels, Anadarko's senior Vice President of Worldwide Exploration. With the large Jubilee field already discovered in Ghana at the eastern limit of the system and the success at the Venus well at the western limit in Sierra Leone, we have established bookends spanning approximately 1,100 kilometers across two of the most exciting and highly prospective basins in the world, he said. Let's hope this give hope to the hopelessness in that part of the world.
EIA Report today! Find out how it's going to impact trading by watching the Fox Business Network where you can see me every day! The Energy Report will be expanding. Make sure you are signed up on the blast to get updates! Call for short term trades and options. We can give you position trade profit objectives as well. Are you having back office problems with your broker! In my experience PFGBest back office is one of the best I have dealt with in all my years in the industry!
Sell October heating oil at 18200 - stop 18500.
We're short October RBOB from apprx 18510 - stopped apprx 17820!!!
Sell October RBOB at 18300 - stop 18500.
Sell November natural gas 477 - stop 507.
The Dan Flynn Corn & Ethanol Report
With news out that the CME Group was policing Funds and Speculators position limits.
It couldn't stop the running of the bulls in the Corn Market. Early frost scares devastated any bears eye of continuing staying short.
In the overnight action the December Corn had a range of 347 3/4 to 341 and as I write the last is 343 1/4 which is down 3 1/4 cents. I still believe we will rally. However look for longs to liquidate and take profits only to reposition longs following the weather.
On the Energy Front we await the weekly inventory numbers . Let's look for builds. Can this be the big break in the Crude Oil Market and be the selloff were looking for ? Stay focused on the U.S. Dollar and weather.
Have a Great Trading Day !