We have a whole slew of Earnings already out today and more released during the day and after the close. It will be interesting to see Chicago based Boeing’s earnings will be. We also have EIA Energy Stocks at 9:30 A.M. and Dairy Product Sales at 2:00 P.M. On the Corn front the May contract is currently trading at 382 3/3 which is 1 ½ of a cent higher in the overnight electronic session. The trading range has been 383 to 380 ½. Even though we are trading higher at the moment I would not write too much in a rally unless it is a technical rally and weather is allegedly going to warm up and farmers will work at a fevers pitch to get crops planted. Although I believe the Corn has the most to offer in the complex we will need to get hot and dry weather later which will give the crop a double-whammy and prices should fly. On the Ethanol front there were no trades posted in the overnight session. The June contract is currently showing 1 bid @ 1.459 and 1 offer @ 1.470 with climbing Open Interest at 770 contracts. On the Crude Oil front last night’s API showed builds on Crude of 1.099 million barrels, draws on Gasoline at 2.724 million barrels, Distillates down 1.911 million and Cushing down 970 thousand barrels. In the overnight electronic session the June Crude Oil was not able to punch through $68 a barrel retreating while waiting for the EIA Energy Stocks data. Will still have plenty a bullish fundamentals in play. In the overnight electronic session the June Crude Oil is currently trading at 6764 which is 6 tics lower. The trading range has been 6799 to 6745. On the Natural Gas front it is Option Expiration Day for the May contract and Last Trading Day tomorrow. So we will focus on the June contract which in the overnight electronic session is currently trading at 2.814 which is unchanged. The trading range has been 2.825 to 2.812. The futures continue to trade premium to the cash market leaving investors and producers scratching their heads.
— Daniel Flynn
The Energy Report: Insane and Ridiculous
President Trump said the Iran Nuclear deal was insane and ridiculous, yet that does not necessarily mean that he is going to back out of it. That possibility helped break oil from near a 3-and-a-half-year high that had rallied, in part, on threats by Iranian President Hassan Rouhani who warned of “severe consequences” if the Trump Administration “betrays the deal.”
In a press conference with French Emmanuel Macron, Trump warned Iran that “If they restart their nuclear program, they will have bigger problems than they had before.” Yet, at the same time the President seemed to wave an olive branch, despite calling it a terrible deal in deference to the French President who seemed to be suggesting that there was a way to save the deal, that President Trump did not dismiss out of hand. Macron proposed a three-point plan to save and modify the Iran nuclear deal, and Mr. Trump said that France and the U.S. could maybe close that deal quickly. But the President also said about the May 12 deadline to decide about whether to pull out of the deal, that no one know what he will do. Isn’t that the truth? Yet the possibility that the U.S. will not pull out of the deal reduced the risk premium for oil causing a sell off along with a sudden spooked U.S. stock market
What was also insane and ridiculous was the stock market’s reaction to a 3% yield. The market that has been praying for an economy that was strong enough to raise rates now somehow fears that a 3% yield is not a good thing, which really is insane and ridiculous. Earnings from 3m and a weak outlook from Caterpillar hurt market sentiment, yet companies should adjust to a growing global economy.
That growing global economy is driving global oil demand. Asian oil demand is surging as trade data from Thomson Reuters Eikon shows seaborne imports of crude oil by Asia’s main buyers will hit a record in April, importing more than 9 million barrels per day (bpd) of crude. U.S. demand is also at records and we are seeing it impact supply. April gasoline demand is a U.S. record and we saw some strong data from the API. While the API reported a +1.099-million-barrel increase in overall crude supply. Strong gas demand led to 2.724 million barrels drop in gas oil supply. Distillates also fell by 1.911 million barrels as demand is rising, and in the Cushing Oklahoma delivery hub supply fell by 930.000 barrels.
Shale oil is rising but even that can’t catch up with rising demand. Bloomberg News Jessica Summers and Sheela Tobben reports that “The Permian shale play is all about setting records. Now, the region may even become the world’s largest oil patch over the next decade. Output in the basin is forecast to reach 3.18 million barrels a day in May, according to the Energy Information Administration. That’s the highest since the agency began compiling records in 2007. By 2023, the basin may produce 4 million barrels a day, according to the International Energy Agency. The Ghawar field in Saudi Arabia is currently the world’s biggest oil field, with capacity of 5.8 million barrels a day, according to a 2017 EIA report.”
This is all thanks to the size of the oil deposits, coupled with increased technology and efficiencies. “The technology is the biggest driver,” said Rob Thummel, managing director at Tortoise, which handles $16 billion in energy-related assets. The basin in and of itself could end up being the largest oil field in the world, even bigger than Ghawar in Saudi Arabia.
— Phil Flynn
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