Haug & Wigelsworth Commodity Futures Group Commodity & Futures Advisors
Daily Market Commentary
The Daily - Comments for November 20th, 2009
DJ Energy Matters: Thanksgiving's Warmth May Sink Oil Market
It's beginning to look a lot like Christmas in the Northeast U.S. heating-oil market, with bloated distillate stockpiles at the highest level since the Yule log was burning in 1998. With the Thanksgiving holiday a week away, temperatures are forecast to be above normal for parts of the world's largest heating-oil market.As stuffed turkeys hit millions of American tables next Thursday, the Atlantic hurricane season closes with a whimper. The fizzling out of the quietest storm season since 1997 removes a potential prop for prices. Now, heating oil's fate rests solely on winter demand, and forecasts look likely to disappoint market bulls. With heating oil poised to slide further and gasoline demand still weak--notwithstanding a holiday travel rise--crude-oil prices, now near $77.50 a barrel, will come under renewed pressure ahead of OPEC's Dec. 22 output talks. If prices hold below $80, the Organization of Petroleum Exporting Countries isn't likely to change policy, amid high global stocks and a tentative recovery in global oil demand on the short-term horizon. In the U.S., the world's largest energy consumer, oil use lags year-earlier levels by 4.1%, or 800,000 barrels a day, at 18.6 million barrels a day. The prolonged consumption crunch has refiners throttling back operations, a tactic that sharply cuts the need for crude oil and heightens near-term pressure on prices. While hurricanes didn't cut refiner output, a phantom storm has swept the industry. Seasonal maintenance, deliberate cutbacks due to weak margins and operational snags cut crude runs to the lowest level for this time of year since 1995 and the lowest level in any week--apart from hurricane-related cutbacks--since February 2000. Refiners are running at below 79.5% of operable capacity, leaving idle more than 3.6 million barrels a day of capacity. That is a record high, outside of weeks that suffered hurricane-related outages. Meantime, stocks continue to build in the key consuming region. Distillate stocks (diesel/heating oil) gained more than one million barrels in New England and the Mid-Atlantic states in the week ended Nov. 13, data from the Energy Information Administration show. Stocks are 36.8% higher than the five-year average and the highest since Dec. 25, 1998. Nationwide, total company-held stocks of crude oil and petroleum products cover 58.7 days of current demand, 10 days more than the five-year average. Carl Larry, president of Oil Outlooks and Opinions, said U.S. refineries will stay in low gear until gasoline stocks (now 5.3% above a year ago, at 209.1 million barrels) drop below 200 million barrels and distillates (at 167.4 million barrels a day) fall below 160 million barrels.
Gasoline stocks haven't been below 200 million barrels in a year and the EIA doesn't see stocks below that level in any month through 2010. Distillate stocks, not far from 27-year highs, will end January 2010 below 160 million barrels, the EIA projects. But that outlook assumes refiners will process 14.2 million barrels a day of crude this month, some 400,000 barrels a day more than they are using so far. Source: Copyright (c) 2009 Dow Jones & Company, Inc.
CBOT Grain, Soybeans Weaken On Outside Pressure
CBOT grain and soybean futures were lower overnight, under pressure from outside markets. The firmer U.S. dollar and lower crude oil and metal futures attracted sellers, analysts say. Light profit taking from prior gains ahead the weekend added to the declines. Dec corn was 3 1/2 cents lower at $3.91 1/2, Dec wheat was 5 1/2 cents lower at $5.57, Jan soybeans were 1 cent lower at $10.38. Source: Copyright (c) 2009 Dow Jones & Company, Inc.
Rising Dollar Pressures Gold, But Not By Much
While gold prices are down slightly as the U.S. dollar climbs, the metal is still well above $1,100 an ounce. Investors who have driven the metal to a string of records appear not that interested in selling, as recent dips have been short-lived and shallow. The support for gold at the moment is broad, with buying coming not only from central banks and speculative investors but also from retail-level purchases. In recent trading on the Comex division of the New York Mercantile Exchange, most-active December gold was down $2.40 at $1,139.50 an ounce while the ICE Futures U.S. Dollar Index was up 0.404 point at 75.697. Nearby November gold was down $1.80 at $1,139.60. George Gero, vice president with RBC Capital Markets Global Futures, described the gold market as pausing after record highs. "Prices remain elevated, and continue to feed off the positive momentum created by Asian central banks showing a growing appetite for increasing gold holdings," said Barclays Capital analyst Natalya Naqvi. This month, the International Monetary Fund sold two metric tons of gold to Mauritius following India's purchase of 200 tons of the 403.3 tons the IMF had earmarked to sell. Sri Lanka has also been buying the metal. Naqvi also noted the U.K. Royal Mint has reported strong gold coin production. She called it "evidence of strong retail interest in gold."
The U.S. Mint has also reported strong coin sales, while dealers say customers are snapping up gold bars and coins. These retail investors, as well as the central banks and speculators--often shorter-term traders than other types of investors--are moving into gold primarily to get out of U.S. dollar holdings or to hedge what they see as potential future inflation. Source: Copyright (c) 2009 Dow Jones & Company, Inc.
ICE Cotton Up Follow Through Buying
ICE cotton futures are higher on follow-through buying that lifted prices off their lows Thursday and took the market to a higher close. Cotton is bucking the overall weak trend in commodities, however, set by a stronger US dollar and lower prices in the key crude oil and metals markets. Chinese cotton futures were higher overnight, aiding the supportive tone in the US. Mar cotton accrued technical strength by trading above near-term resistance at 73.39 cents, with the Nov 11 high of 74.27 providing an additional upside target. ICE Mar cotton is up 66 points at 73.63 cents a pound. Source: Copyright (c) 2009 Dow Jones & Company, Inc.
