Slip sliding away again. Oil demand's slip rips the energy complex wiping away this week's early bullish optimism. The oil market might have flirted with $50 but after yesterday it was more in danger of testing $40.
Once again the weight of the global financial crisis is crushing the dreams of oil bulls across the land. China, long the great hope of the staunchest oil bulls as reported by Bloomberg News, cut net crude-oil imports to the lowest in at least two years in February as a slowing economy caused refiners to tap stockpiles and reduce purchases. Bloomberg reported that net shipments dropped a second month to 11.12 million metric tons, about 2.9 million barrels a day. Imports fell 18 percent, the largest drop since at least 2006. China Petroleum and Chemical Corp said that the demand for oil dropped substantially in January. Many traders believe that if oil is ever going to achieve the type of bullish fervor it has experienced in the past, it will have to be driven by China.
Oil was more than happy to rally on talk of massive Chinese stimulus and talk of China buying commodities with their vast cash reserves yet unless the fundamentals of the Chinese economy improves dramatically those purchases, though supportive in the short term, are bearish in the long run. If China builds up huge oil reserves when demand is weak they will have built up a much larger cushion of supply when demand returns.
The Department of Energy added to the bearish demand sentiment. The DOE reported that total US oil demand fell 3.5% to a paltry 18.9 million barrels a day, the lowest since January 9. Refinery runs fell hard and despite the fact that a larger than expected drawdown in gasoline supply the heaviness weighed over the complex.
Oil is still trying to balance the short term realities of current horrible demand versus the point at which demand might turn around. The bulls are hoping that the cut backs in production by OPEC, low refinery runs and the cut back in projects will be met by a surprise surge in the economy. When will demand rise up again to overtake supply? Will it be sooner or later? After yesterday's demand numbers the answer is probably later.
We're short April crude from apprx 4570 - stop 5100.
Sell April heating oil at 12700 - stop 13300.
Sell April RBOB at 13500 - stop 14300.
We're short April natural gas from apprx 437 - lower stop 411!
The Dan Flynn Corn & Ethanol Report
Thursday March 12th 2009
Good Morning !
The May Corn settled at 366 3/4 which was 2 1/4 cents higher in last nights trading.
The range was 367 1/4 to 362 3/4.
After yesterdays bullish number on Corn and Soybeans it followed the week Wheat number and faild later in the session.
Watch out for more rollover action.
On the Energyy Front no change, I remain bearish.
Have a Great Trading Day !