In yesterday’s trading session the September Corn settled 5 ¾ cents higher mainly due to the fact that rains forecasted did not materialize. The USDA Crop Progress showed no change in condition ratings for U.S. Corn, Soybeans and Spring Wheat crops, according to estimates of 12 analyst polled by Reuters. The poll showed that the Corn crop was 61% good to excellent which was in line with expectations. In the overnight electronic session the September Corn is currently trading at 373 ½ which is 1 ¼ of a cent higher. The trading range has been 374 ¼ to 371 ¼.
On the Ethanol front the September contract is currently trading at 1.611 which is .016 higher. The trading range has been 1.626 to 1.593 with Estimated Volume of 28 contracts traded and Open Interest at 927 contracts.
On the Crude Oil front we have the weekly API Energy Stocks at 3:30 P.M. If the data shows more draws the market will attempt to achieve resistance through $50 a barrel. In the overnight electronic session the September contract is currently trading at 4939 which is unchanged. The trading range has been 4979 to 4918.
On the Natural Gas front weather is the factor that is keeping prices low. In quiet trade in the overnight electronic session the September contract is currently trading at 2.816 which is 1 ½ of a cent higher. The trading range has been 2.832 to 2.801.
— Daniel Flynn
The Energy Report: Supply side drama
The oil drama continues as Repsol and Statoil move to pull oil workers from Venezuela as the country becomes less stable and may be on a path towards civil war. Saudi Arabia’s Saudi Aramco said it is cutting supply to its customers by at least 520,000 barrels per day (bpd) in September raising expectations that OPEC will get its compliance issues under control and start to rein in Libya and Nigerian production.
The oil companies are starting to flee Venezuela. Bloomberg News reported that Repsol SA pulled all foreign workers from its fields in Venezuela, and that Norway’s Statoil ASA also removed all expat staff. The exit of oil workers is a major blow to the Maduro government as the lack of foreign expertise we lead to further drops in their oil production and raise the possibility of bond defaults as Venezuela’s cash cow starts to run dry due to ignorance and stupidity.
The oil market is shaking off reports of poor compliance and instead now is focusing on a tightening global supply situation. With more press picking up on the sharp decline rates in the Permian basin, as well as risng shale lease costs, the expectation that shale production is near a peak for the year is going to start gaining momentum. Now if OPEC can keep it together, we should see the recent drain on global oil inventories continue into the end of the year. We expect to see oil and products fall around 2 million barrels and refinery runs to stay flat but still near record highs.
Record gasoline demand has helped drive gasoline costs and refiners are in high gear to meet that demand. AAA put the national average price for regular unleaded gasoline is $2.35 per gallon, which is three cents more than last week, nine cents more than one month ago, and 23 cents more than at the same time last year. Still seasonally we have peaked but this year’s seasonals have been out of whack. Look for record gas demand to continue.
BP is reporting that it has found a fertile new source of shale gas in New Mexico on land it bought from a U.S. shale driller two years ago according to the Houston Chronicle. “BP said that one of its natural gas wells in the Mancos Shale reached the region’s highest production rate in 14 years, pumping 12.9 million cubic feet of gas a day in an initial 30-day period. By comparison, horizontal gas wells in the Eagle Ford Shale in South Texas produce some 8 to 12 million cubic feet of gas a day, according to energy research.
Oil should break out of its range to the upside soon. A big drop in oil inventories could be the trick. Vacation like trading volume is also hampering action.
— Phil Flynn
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