Like the John Fogerty song Change in the weather and the closing days in harvest are keeping farmers off the field with wet cold weather. With smaller farmers and remaining acreage the question is do we try and take it out of the ground now or take a beating with silos full and cash prices in the basement. Or do we leave it in the ground and take advantage of higher prices when spring plantings start. When you are cash strapped it is a hard call. In the overnight electronic session the December Corn is currently trading at 338 ½ which is a ¼ of a cent higher. The trading range has been 338 ¾ to 338.
On the Ethanol front there were no trades posted in the overnight electronic session. The December contract settled at 1.408 and is currently showing 2 bids @ 1.401 and 3 offers @ 1.415 with declining st Open Interest at 1,089 contracts.
On the Natural Gas front we have the weekly EIA Gas Storage and the Thomson Reuters poll with 22 analysts participating expect draws from 3 bcf to 23 bcf with the median draw of 14 bcf. This compares to last week injection build of 15 bcf, the 1-year injection build of 34 bcf and the five-year average of injection builds of 12 bcf. The numbers coincides with higher than usual heating demand, rising exports and the retirement of Coal Plants. If we have a cold winter this market will soar to all-time highs. In the overnight electronic session the December Natural Gas is currently trading at 3.100 which is 2 cents higher. The trading range has been 3.101 to 3.071.
On the Crude Oil front the market is still walking on egg shells with the International Energy Administration (IEA) predicting a slowdown on demand with the market in overbought mode, made this correction this week shaky. In the overnight electronic session the December Crude Oil is currently trading at 5515 which is 18 tics lower. The trading range has been 5548 to 5507. Monday is Last Trading Day On December Crude Oil so you want to roll or liquidate before tomorrows close.
— Dan Flynn
The Energy Report: Distillate dreams
The Energy Information Administration (EIA) reported a more supportive snapshot of petroleum supply and demand than the American Petroleum Institute (API) reported, and while the report was not as bullish as pre-API report expectations from a seasonal standpoint it was supportive.
The EIA reported that total commercial petroleum stocks increased 2.75MB and while that might have been more than expected, it pales in comparison to the 7-million-barrel increase in supply a year ago. In fact, commercial inventories now stand at a whopping 81 million barrels below a year ago, and one of the biggest year over year declines in history.
Crude supply reportedly increased by 1.854 million barrels, the third increase in supply out of the last four but that was offset somewhat by a 1.5 million barrel drop in the Cushing Oklahoma delivery point. The overall crude supply number was enhanced by a 0.7-million-barrel release of oil from the U.S. Strategic Petroleum Reserve. Yet, crude demand will remain strong as refiners run at near record rates at 91% of capacity to try to catch up with distillate supply that are at this time well below normal for this time of year. The EIA reported that distillate supply increased by 700,000 barrels as domestic demand fell 1.5million barrels a day.
Still many distillate users are under hedged as they were caught in the lower for longer hype that kept many from locking in at better prices. Many farmers already reeling from low corn prices are getting hit with rising diesel costs as U.S. refiners are trying to satisfy strong global distillate demand.
U.S. diesel exports are surging increasing by 28,000 barrels a day last week. Laura Blewitt and Amy Stillman of Bloomberg news report that “Mexico is scouring the earth to stock up on diesel fuel before market-liberalization measures take effect. Petroleos Mexicanos, the country’s state-run oil company, has been on a buying spree of about a tanker load of diesel a day from the U.S. alone this year and recently purchased it as far afield as the United Arab Emirates and China. Mexico is set to lift price limits on the fuel used to run heavy trucks and generate electricity, making 2018 prices uncertain.”
They report that the end of the price limits come as Mexico’s appetite for foreign diesel has surged this year as domestic production plummeted after the country’s biggest oil refinery went offline. Mexican refineries operated at less than 33 percent of total capacity in September, the last date for which figures, and crude processing is at the lowest level since 1990, according to Mexico’s energy information agency. U.S. diesel exports to Mexico increased to a record high of 272,000 barrels a day in September, according to the latest data from the U.S. Census Bureau.
Ready to use ‘gasoline’ stocks did increase by 1.6MB which is the first gasoline supply increase in 4 weeks. Demand eased off from records to about 9.2 million barrels a day. While oil works off some of its overbought conditions there are many factors that could move us.
Reports that Russian Oil companies are complaining that their cuts and pain is benefitting others like US shale. The Venezuela default that could lead to a total collasps of Venezuela’s oil production.
Ongoing tensions with Saudi Ariba, Iran and whether they will strike Hezbollah in Lebanon. Reuters reports that France said that Lebanese Prime Minister Saad al-Hariri, who Lebanon’s president says is being held hostage by Saudi Arabia, will visit France with his family in coming days.
Hariri travelled to Riyadh on Nov. 3 before abruptly resigning in a televised statement a day later. He has stayed in Riyadh and top Lebanese officials and senior politicians close to Hariri have told Reuters he was forced to quit. Hariri and Saudi Arabia have both denied he is being held in Riyadh or was coerced to resign. Hariri has said he will return to Lebanon in the next few days to formally submit his resignation. Saty tuned
Natural gas is in a flux as weather models continue to differ about how cold the next weather cycle is going to get. As Nat gas is at a low level a possible price spike could happen if we come on the colder end. Most of the trade has been leaning toward the warmer forecast but based on some models, that could be wrong. If they are, then we could see a 20-cent spike. If it stays then we should go fill the gap on the downside and target about 2.980.
— Phil Flynn
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