We start this trading week with Export inspections at 10:00 A.M., Consumer Credit at 2:00 P.M. and Crop Progress at 3:00 P.M. On the Corn front Karen Braun with Thomson Reuters reported that despite the slow start to planting, the U.S. corn crop has entered July in one of the most mature states ever for this time of year. The speed of development does not exactly insure great yield outcomes, but highlights weather factoring in the coming months. As of July 1st 17% of U.S. Corn was in the silking stage. According to the USDA this is the second largest amount of Corn silking since 1981 and 9% ahead of the five-year average. The fastest July 1st silking was 25% in 2012. In the overnight electronic session the September Corn is currently trading at 356 which is 4 ¼ cents lower. The trading range has been 359 ¼ to 353 ½. Investors may keep their powder dry ahead of Thursday’s Export Sales, Crop Production and USDA Supply/Demand data.
On the Ethanol front the industry will not miss Scott Pruitt and the alleged olive branch big oil offered with higher octane levels seems to be shelved for now and we will most likely see more negotiations with the Renewable Fuels Standard. In the overnight electronic session the August Ethanol is currently trading at 1.430 which is .009 lower. The trading range has been 1.439 to 1.430. 2 contracts traded and Open Interest at 1,034 contracts. The market is currently showing 1 bid @ 1.426 and 2 offers @ 1.432.
On the Crude Oil front AlphaBBL analyzed storage tanks in Cushing, Oklahoma, Texas, Louisiana and Illinois. Crude Oil storage in Illinois and Louisiana rosewhile Texas and Cushing decreased. AlphaBBL’s estimate was a storage negative of 2.3 million barrels while the EIA estimate was 2.1 million barrels. Remnants of Tropical Storm is producing heavy rains and strong gusty winds over northeastern Caribbean Sea and the northern Leeward Islands. The disturbance is now moving west-northwestwardly. Investors are now seeing little chance to enter the Gulf of Mexico at this point. In the overnight electronic session the August Crude Oil is currently trading at 7394 which is 14 tics higher. The trading range has been 7428 to 7346.
On the Natural Gas front the market is trading lower in the overnight electronic session with the August contract currently trading at 2.833 which is 2 ½ cents lower. The trading range has been 2.865 to 2.823.
— Daniel Flynn
The Energy Report: Tight tope
The Energy Report gave an early warning about the state of the crude market we are in now. We warned producers and users of oil, gas and diesel to hedge. Now there are reports of airlines reducing capacity and businesses that are struggling due to higher crude and product costs. The recent oil price strength was born in the price crash in 2015 as it forced companies to cut investment and incorrect assessments about shale oil and the outlook for demand. Now the global oil market is in a precarious state and now almost everyone is aware of and concerned about the tight market conditions that increase the possibly of supply shock prices as global inventories are not sufficient to alleviate shortages.
One area of concern is supply in the U.S. delivery point in Cushing Oklahoma. Due to record U.S refining demand and Canadian oil sands outage by Suncor Syncrude, sent supplies in that delivery point to a 3 and a half year low. It looks like those supplies are still tightening. The Kyber Weekly Cushing Report showed that supply fell another 1,062,210 million barrels last week. The market needs Syncrude to get back on line, the company has released a return to service plan.
The expectation that one coker, producing approximately 150,000 bbls/d, will return to service during the second half of July; the expectation that a second coker, producing approximately 100,000 bbls/d, will return to service during the first half of August.
U.S. oil production must continue to rise to replace spare production capacity that was wiped out across the globe to short sighted thinking. There was good news on that front as energy companies last week increased the number of rigs drilling for oil by five to 863, up 100 year-on-year.
Reuters reported that the Syrian military air defenses struck an Israeli warplane and shot down Israeli missiles targeting the T4 air base in Homs province in response to an act of “aggression” on Sunday night, Syrian state media said. Increasing geopolitical risk is a factor that could keep us supported today. Even in the aftermath of the so-called trade war with China.
The Wall Street Journal reports in Pricier Fuel to Test Airline Profits that Jet fuel prices have been rising and under hedged airlines are looking for ways to stay profitable. There is talk of reduced capacity and rising fare prices. Delta earnings this week will offer clues on industry plans for tackling higher costs according to the Journal.
Gas price increase in Haiti was causing riots. In Port-au-Prince the AFP reports that Haiti’s President Juvenile Moise called on protesters late Saturday to “go home” after the suspension of a fuel price hike that triggered violent protests and left at least two dead in the Caribbean nation.
In an address broadcast on state television, Moise said he had “corrected what had to be corrected” following an about-face on the price increases earlier that day. “As soon as you speak, I listen. Because you started sending me this message last night, I received it and corrected what had to be corrected,” Moise said. “To those watching me tonight, I ask you all: go home,” he said, adding authorities had been directed to clean the streets. The capital Port-au-Prince and its environs have stood paralyzed since Friday afternoon, with major routes blocked by barricades, some made of burning tires, and some protesters even calling for a revolution in the impoverished country.
Oil is taking a break but our beginning of the year target of hitting $80 is on target. Many others are now joining that call Natural gas heat wave is keeping market supported. We are seeing record production in the U.S.
— Phil Flynn
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