Today’s reports are Construction Spending and ISM Manufacturing Index at 9:00 A.M. Central followed by API Energy Stocks at 3:30 P.M. All eyes remain on how long this Arctic blast will last. The bitter pill we are all swallowing is threatening Winter Wheat with no snow coverage to keep the bitter cold from the ground. Live Cattle will be freezing in the field and could lower the heavy Placements we saw in the last Cattle on Feed report and the next report will be coming on January 26th. Also rails are affected not to freeze which is slowing deliveries and shipping in the New York Harbor is affecting deliveries of Home Heating Oil with cold on the East Coast from Maine to Florida.
On the Corn front the market is trying to gather legs as well with temperatures starting speculation of higher prices to come. Whispers are resonating that buyers can be found in the Cash market as we see breaks to the downside in the futures markets. In the overnight electronic session the March Corn is currently trading at 354 ¼ which is 1 cent higher. The trading range has been 354 ¾ to 352 ½.
On the Ethanol front the January contract expires tomorrow so you need to roll or liquidate today. The February contract posted a trade at 1.360 which is a ½ of a cent lower with 5 contracts traded. The Open Interest is at 1,619 contracts and the market is currently showing 1 bid @ 1.353 and 1 offer @ 1.359.
On the Crude Oil front there is just plenty of news to drive this market higher with tight supplies with OPEC production cuts, the brutal weather slowing production, and the cold weather slowing deliveries and possible sanctions on Iran. In the overnight electronic session the February contract is currently trading at 6085 which is 48 points higher. The trading range has been 6093 to 6028.
On the Natural Gas front the market easing off with the perception of plenty of supply that will be able to offset the Arctic blast , also the boost in Coal production under this administration. In the overnight electronic session the February contract is currently trading at 3.016 which is 4 cents lower. The trading range has been 3.056 to 2.985.
— Daniel Flynn
The Energy Report: The excuse
The unrest in Iran may give the Trump administration the ammunition it needs to back out of the Iranian nuclear deal and slap new sanctions on Iran. President Trump views Iran as the number one state sponsor of terror and feels that the Iranian regime is one of the major causes of war and conflict in the region. Trump wants to take a hard stance against Iran and this could be his opening.
As far as Iran goes it looks like Iranian President Hassan Rouhani will be set up as the fall guy as he is not a favorite of the Iranian hardliners and because he is the public face of Iran’s bad economy. President Rouhani made all kinds of promises that after he signed the Iranian nuclear deal, economic good times for the Iranian people would be right around the corner. Instead unemployment is high, and the Iranian economy is not benefiting from the economic surge that we are seeing in the rest of the globe.
The Supreme Leader Ali Khamenei has yet to make a statement but there is a growing sense that he is being pressured by the hardliners to crack down hard on the protestors. Of course, if Khamenei goes that route he will give President Trump the excuse he needs to come down even harder on the Iranian regime. More sanctions would mean higher oil prices. If the Supreme Leader cracks down too hard it would be a mistake as President Trump might get the support from other allies to toughen sanctions if not to reverse the Iranian nuclear deal that Trump says was a terrible deal.
The Libyan oil pipeline that was attacked by terrorists has been restarted and so has the Fortes pipeline, yet it will take time to replace all the oil that was lost over the last few weeks. The Zaggut to Es Sider oil pipeline, in eastern Libya, cost the market 70,000 barrels to 100,000 barrels of oil production per day and Fortes 450,000 barrels per day.
As far as reports go we get a double dose of post-holiday excitement. The Energy Information Administration (EIA) is going to release reports on petroleum stockpiles as well as demand and storage for natural gas. We are looking for yet another big draw on crude oil in 2 million barrels! For distillate, look for a drop of 3.5 and gasoline a drop of 1.0 million barrels. Natural gas should see a drop of 222 bcf. Though the whisper number could see a drop larger than the 222. Cold and now snow will grip traders’ minds.
We saw Heating Oil post big gains against RBOB gasoline as the demand for distillate for heating fuels and power generation oil will outstrip demand for gasoline as drivers stay home and stay warm.
Gold is on a tear and bitcoin made a comeback. Gold rose for eight sessions in a row to close at a three-month high. Bit coin, that has lost ground since the CME lunch, got a boost after it was revealed by the Wall Street Journal of a big bet! The Wall Street Journal reported that the “Founders Fund, the venture-capital firm co-founded by Peter Thiel, has amassed hundreds of millions of dollars of the volatile cryptocurrency, people familiar with the matter said. The bet has been spread across several of the firm’s most recent funds, the people said, including one that began investing in mid-2017 and made bitcoin one of its first investments.”
— Phil Flynn
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