[B]North American Commodity Update[/B][B]
Commodities - Energy
Winter Storms and Bolstered Demand Forecasts offset Speculative Interests in Crude
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Crude Oil (LS NYMEX) - $74.48 // $0.74 // 1.00%[/B]
Through other asset classes were little changed on the day, crude proved to have a considerable supply of bullish pressure behind it Wednesday with an advance that would carry the commodity up to the closely watched $75 level. However, the path to this resistance point was certainly not linear. In fact, oil prices would show a dramatic bear and bull swing through the active pit trading hours of the US session. Picking apart the many fundamental catalysts for the day, risk appetite lost much of the pull it would evoke yesterday. Following yesterday’s rumors that Greece would find financial aid from either Germany or the European Union, the market has gone quiet to await the release of any plans that are put forth. Regional leader are expected to gather for a summit tomorrow; and market participants no doubt expect details for whatever approach they may agree on sometime in the middle or late hours of the European session. No doubt, a package that includes loans would be considered a meaningful support; but the more likely outcome of loan guarantees may not suffice. Fears that that the group could fall short bolstered the US dollar (a safe haven) through the early New York session; and crude would suffer in turn.
Outside the influence of pure risk appetite trends, oil traders would find plenty of news on their plate to digest. The winter storm that meteorological services have predicted for the US East Coast for days would finally descend on the major cities. With an expected snowfall of 20 inches, business and transportation hubs from New York to Philadelphia to Washington DC would grind to a halt. Considering this region of the United States accounts for approximately 80 percent of the entire nation’s heating oil consumption, this event clearly has its bullish implications. Then again, the fact that it has significantly reduced business output in the region also has its impact on demand. Speaking of demand, the US Energy Department would release its Short-Term Energy Outlook. Forecasts for global oil consumption were lifted from 85.18 million barrels per day to 85.3 million barrels through 2010 while the average price through the year was lowered from $79.83 to $79.78. On the other hand, the more highly anticipated report from the DoE (the weekly inventory figures) was delayed until Friday due to the inclement weather shutting Washington DC down for the day. Nonetheless, anticipation for this report has increased recently due to the API’s report of a 7.2 million barrel increase in crude stockpiles in its own reading. This substantial increase pushed overall inventories to 337.6 million barrels – the highest level since October. Another developing threat for the energy market are the tensions building between Iran and the international community. The US took the step of freezing the assets of four companies that have ties to Iran’s Islamic Revolutionary Guard Corp.
[B]Watch our weekly, live coverage of the DoE Inventory figures every Wednesday beginning at 10:15 AM EST.[/B]
[B]Commodities - Metals[/B]
[B]Momentum Eludes Gold Again as Market Sentiment Settles and the Dollar Advances
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Spot Gold - $1,072.00 // -$6.10 // -0.57%[/B]
Though gold has been able to climb back above $1,075 (a level that proved difficult to breach as a level of support through December and January), the metal has established little in the way of momentum to establish a sense of conviction behind an otherwise high level of volatility. Yesterday, the commodity was unable to capitalize on the sharp rebound in risk appetite and drop in the US dollar; and today, a stabilization in investor sentiment wouldn’t offer the traders a second chance to correct this unusual break. Through the European and US hours, news that the European Union was scheduled to convene in Brussels tomorrow to discuss the assistance the region should extend Greece led investors to forestall major investments or divestments. However, the rumor mill would run despite a lack of tangible data. According to unnamed sources, the EU is likely to extend loan guarantees to the financial strapped economy while Germany is contemplating options that could offer something more. While loan guarantees should be all that is needed to reestablish confidence in Greece’s efforts to work down its deficits; a general sense of risk aversion could negate the positive implications such a move would entail. This doubt would bolster the safe haven greenback and thereby weigh on the market’s favored dollar-hedges – including gold. Additional support would come to the single currency by way of Fed Chairman Bernanke’s commentary to the House Financial Service Committee. Though the central banker said he saw little room for tightening monetary policy in the near future, he suggested the discount rate could be lifted “before long.” To speculators, this is a hawkish step and an additional step to fight inflation.
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Spot Silver - $15.12 // -$0.25 // -1.60%[/B]
Silver would put in for a higher high and higher low Thursday; but the commodity would nonetheless suffer from restrained momentum and a general lack of direction. Yesterday’s advance (the first for the commodity in the past five days) proved temporary as speculation over an imminent bailout for Greece has turned into ‘wait-and-see’ scenario. Considering the broader markets have afforded the EU meeting tomorrow so much attention, there is little doubt that it has the potential to command volatility and trend for silver and most other risk-sensitive asset.
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[I]Written by John Kicklighter, Strategist
Questions or Comments about this article? Send them to <[email protected]>[/I]