In the aftermath of the slide after Tuesday’s USDA data release Corn and Soybeans seem to be in bottoming mode for now. In the overnight electronic session the December Corn is currently trading at 354 ¼ which is 2 ¾ cents higher. The trading range has been 354 ½ to 352 ½. Weather will be the market mover as we get ever so closer to harvest.
On the Ethanol front the October contract is last at 1.563 which is unchanged with 10 contracts traded. The market is currently showing 7 bids @ 1.563 and 1 offer @ 1.570. With dwindling Open Interest at 674 contracts.
On the Crude Oil front we had a close above $49 a barrel yesterday and we are rolling in the overnight electronic session. We took partial profits on some mini-Crude contracts at the 4980 level which is on the high side of the Bollinger Band. We make a run and shoot for $50 a barrel in today’s action with stiff resistance at 4999. The October contract is currently trading at 4991 which is 61 points higher. The trading range has been 4995 to 4988. Refineries are working at full tilt with politics breathing down their necks to get Energy in needed places in Texas and Florida as soon as possible. They will eventually have to do maintenance and that could cause shortages in Heating Oil as the normal time for maintenance is now in shoulder season.
On the Natural Gas front the market is currently trading at 3.058 which is unchanged. The trading range has been 3.068 to 3.043. Today we have the weekly EIA Gas Storage and the Reuters News weekly poll with 23 participants estimates builds of 70 to 94 bcf. This compares to the 1 week of 65bcf, the 1-year 58 bcf and the five-year average of 63 bcf. The numbers can be attributed to a decline in air-conditioning demand due to cooler than normal temperatures.
— Dan Flynn
The Energy Report: Impact statement
The Energy Information Administration (EIA) reported quite clearly the impact that Hurricane Harvey and Irma had on gasoline supply. They reported the biggest gasoline drawdown in history, 8.428 million barrels, putting gasoline supply back to a three year low. Yet at the same it showed what the US refining community is going to have to do and it basically means that they will demand more crude oil as they look to rebuild supply. It also means that the normal seasonal slowdown for crude in maintenance season on will be out of kilter, the shutdown and restarting of refiners means that their maintenance is already done and other refiners may put off maintenance as there is pressure to try to build ample supply as we are still seeing gas shortages in Florida and the margins are still strong.
For crude bulls, you still have that upper Bollinger Band resistance that has proven to be a ceiling for oil all year. So today could set the stage for a major upside breakout if they can break above that band and stay there. A pullback from that level would mean more of the same range trading that we have been in and we would pull back to support. We expect that we have a good shot to break out because global demand figures and expectations have been on fire but weak demand from China overnight is giving hope to the bears that we can go back to trading the range in a zombie like state.
Crude bears also hoped that the biggest crude build in 6 months, coming it at 5.888 million barrels, and a huge jump in U.S. oil production from 8,781 million barrels a day to 9.353 million barrels a day, would send oil falling. But the crude rise was smaller than some had thought and came as refinery runs fell by 2 percentage points to 77.7 percent, the lowest rate since 2008 to 394,000 barrels per day. As refineres ramp up they will have to build up distillates which fell by 3.215 million barrels a day, the biggest draw in 6 months. Yet they rallied right back to the resistance and are trying to see if we can breakout.
ABC reported a slowing after a range of data has shown a broad loss of momentum in domestic demand. Electricity, steel and cement production slowed in August. Front-loaded infrastructure spending from earlier in the year slowed rapidly. Cooling retail sales. The key monthly readings on industrial production, infrastructure spending and retail sales in August were all weaker than the month before and below market expectations. Industrial production showed a marked step-down with the output of key drivers such as electricity, steel and cement all slowing. The manufacture of consumer items such as cars and mobile phones also fell. Overall industrial production is now growing at its slowest pace since January, just before spending stimulus and easier credit conditions kicked in.
The Wall Street Journal is reporting that Venezuela has officially stopped accepting US dollars as payment for its crude oil exports. So save up your Bolivars.
Bloomberg reports that, “Saudi Arabia is preparing contingency plans for a possible delay to the initial public offering of its state-owned oil company by a few months into 2019, according to people familiar with the matter. While the government is still aiming for a Saudi Aramco IPO in the second half of next year, that timetable is increasingly tight for what’s likely to be the biggest share sale in history, the people said, asking not to be named discussing internal deliberations.” Saudi Aramco said in statement the IPO “remains on track”. The IPO process is well underway and Saudi Aramco remains focused on ensuring that all IPO related work is completed to the very highest standards on time.” It didn’t give a timeframe. The comment was echoed by a Saudi government source Wednesday. Officials have previously said the most likely schedule is the second half of next year.
Oil driller Seadrill filed for Bankruptcy. Offshore driller controlled by billionaire John Fredriksen, filed for bankruptcy protection after working out a deal with almost all its senior lenders to inject $1 billion of new money into the company. Under the proposal, lenders will extend the maturity on $5.7 billion in debt, with no amortization payments due until 2020. Should lower-ranking creditors join the proposal, $2.3 billion in unsecured bonds would be converted into a 15 percent stake in the company, Seadrill said in a statement.
— Phil Flynn
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