The global markets are burping on our hiccup correction as we knew it was coming starting with it was eventual a bull market must retreat from the gains of a major rally and a more hawkish view on Interest Rates, which is a sign the economy is on the move in a great way. It just can’t continue to roll like a juggernaut without any resistance and this market corrected on good news not bad news… Another factor with months of the VIX shaking off all of the volatility and finally are seeing the signs we could be volatile from here on out which is not necessarily a bad thing. Another thing to think about is all the algorithm traders losing money trading and writing VIX options to do window dressing but with Friday’s and yesterday’s action the VIX woke up creating a panic. This morning we have the U.S. Trade Balance and at 3:30 P.M. we have the API Energy Stocks. On Thursday we will have world crop end-stocks, South America crop report and U.S. grain end-stocks. On the Corn front the March Corn is currently trading at 358 which is ¾ of a cent lower. The trading range has been 358 ¾ to 356 ¼. The market may be quiet heading into Thursday Export Sales, Crop Production USDA Supply/Demand.
On the Ethanol front there were no trades posted in the overnight electronic session. The March contract settled at 1.431, and is currently showing 1 bid @ 1.431 and 1 offer @ 1.435 with Open Interest at 1,213 contracts and the April on its heels with 503 contracts Open with an early Easter which is usually the start of the summer driving season.
On the Crude Oil front the whisper numbers are calling for builds on Crude Oil and draws on Products. In the overnight electronic session the March Crude Oil is currently trading at 6330 which is 85 points higher. The trading range has been 6398 to 6312.
On the Natural Gas front the market remains in selloff mode regardless of the weather. In the overnight electronic session the March contract is currently trading at 2.717 which is 3 cents lower. The trading range has been 2.785 to 2.712. We will need another record draw on Thursdays EIA Gas Storage for this market to take notice.
— Daniel Flynn
The Energy Report: Mayhem
Market mayhem, or maybe just a correction, is shattering nerves and causing crazy volatility. We saw the biggest jump in the VIX volatility index or fear index in history. Of course, when your driven by fear and algos it’s hard to find stability. Oil is being driven down by fear and not reality as demand so far is exceptional. Unless fear and mayhem take the focus of current reality, oil will come back big as long as we see stability in stocks.
The oil market, like the stock market is worried that too much of a good thing can be a bad thing. Strong economic data has raised the fear of inflation and the fears of rising rates and less cooperate profits ahead.
OPEC is worried that they may be a victim of their own success. The cartel’s historic compliance has led to a very tight global oil market that may exasperate economic worries that have suddenly appeared in global markets. Maybe the market is signaling rough times ahead or maybe it’s just signaling a market correction. We believe that this is a much-needed correction and is healthy for longer term economic growth. The economic backdrop to this sell-off is rising wages, strong manufacturing and non manufacuring data. Strong growth.
Oil traders are expecting to see an increase in crude supply even as we see a big draw in Cushing Oklahoma yet again. Strong global distillate demand will keep the ultra-low sulfur diesel well supported. Use market weakness to establish more long-term call positions as the global demand versus supply curve should continue to come in.
— Phil Flynn
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