Crude Marks New Year High, Extends Five-Day Rally as Dow Advances Fills in for Delaye

Commodities - Energy [B]

Crude Oil (WTI) - $74.88 // $0.73 // 0.98%[/B]
The world’s most precious resource is now the most expensive it has been in almost exactly a year. Crude is now filling out its fifth consecutive daily advance – the most consistent bull trend since the run between August the 18th through the 24th. Despite marking the impromptu high for the year, price action has been otherwise choppy. The run to the intraday high of $75.40 (for the nearby futures contract) was not clear cut and would eventually fall back into a loose range between $75.20 and $74.50. This hesitancy to capitalize on what is arguably a breakout mimics the same pace that equities, other commodities and FX is developing. What is the common link between all these asset classes? Appetite for risk. Despite the blatant and steady rally that has developed over the past seven months, a steady advance is not guaranteed. It is growing increasingly difficult for fundamentals to support and justify such high prices.

Outside the broader themes, demand is still a prominent concern for oil traders. This morning, the American Petroleum Institute (API) reported crude production in the US rose 35 percent through September from the same period a year ago to 5.29 million barrels per day. This is reportedly the highest output levels since 2005 and has been buffered by tempered demand due to the recession and a light hurricane season. Due to the Columbus day holiday, the API has pushed back its weekly release schedule to 16:30 EST. The Energy Information Agency (EIA) will release its numbers tomorrow at 11:00 EST. However, Managing Director Tanaka in the meantime offered a few comments on the market when speaking about the greenhouse agreement expected to be reached in Copenhagen in December. He said that future spikes in oil prices were still a “concern,” and the outlook for demand was “not promising.”

Commodities - Metals

[B]Another Record High from Gold Doesn’t Support Momentum[/B]

[B]Gold - $1062.40 // -$1.90 // -0.18%[/B]
Gold has set a new, intraday record high for a second consecutive session; but today’s overall advance lacked the conviction seen in Tuesday’s drive to a new high. This breaks somewhat from the tight correlation with risk appetite that has guided gold prices while the market’s demand for a safe haven has diminished and the threat of inflation still seems distant. The next spark for volatility in gold will come through tomorrow’s US consumer inflation data. If there is any merit to concerns over emerging price pressures we (and policy officials) will have to come through this data. The August data showed the first significant uptick in the plummeting, annualized CPI gauge (up to a 1.5 percent pace from a 50-year low 2.1 percent pace in July); but we have yet to establish this as a turn in trend. To support an outlook for policy officials tolerating inflation in an effort to ease the nation’s deficit, we first need to see the foundation of a imminent reversal in inflation. In other news, ETF Securities reported it attracted $233.2 million this past week to reach a record capital under management of $16 billion. Risk appetite is obviously not aimed at equities alone - especially with the commodity grabbing headlines by pushing record highs. [B] Silver - $17.86 // $0.07 // 0.39%[/B] While Silver was showing a bullish change mid-day in the US session, the commodity was nonetheless showing price action that very closely resembled that of gold – new highs, lots of chop and little progress. The congestion that has dominated price action ever since the most recent rally climbed above the September 17th swing high has shown the limited interest in this semi-speculative metal. Practical demand for this commodity is equally tepid with the outlook for growth finding little additional news to brighten the already optimistic, global outlook.

[I]-Written by John Kicklighter, CFDTrading Research
Questions/Comments about this article? Send them to <[email protected]>[/I]